Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and FY 2012 Rates; Hospitals' FTE Resident Caps for Graduate Medical Education Payment, 51476-51846 [2011-19719]

Download as PDF 51476 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 412, 413, and 476 [CMS–1518–F; CMS–1430–F] RIN 0938–AQ24; RIN 0938–AQ92 Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the LongTerm Care Hospital Prospective Payment System and FY 2012 Rates; Hospitals’ FTE Resident Caps for Graduate Medical Education Payment Centers for Medicare and Medicaid Services (CMS), HHS. ACTION: Final rules. 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 statutory provisions contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively known as the Affordable Care Act) and other legislation. 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 implementing certain statutory changes made by the Affordable Care Act. In addition, we are finalizing an interim final rule with comment period that implements section 203 of the Medicare and Medicaid Extenders Act of 2010 relating to the treatment of teaching hospitals that are members of the same Medicare graduate medical education affiliated groups for the purpose of determining possible full-time equivalent (FTE) resident cap reductions. DATES: Effective dates: These final rules are effective on October 1, 2011, except for the provisions of § 412.230(d)(5), which are effective September 1, 2011. Effective July 29, 2011, the interim rule published March 14, 2011, at 76 FR 13515, is confirmed as final without change. Applicability dates: The update to the rate-of-increase limits for certain mstockstill on DSK4VPTVN1PROD with RULES2 SUMMARY: VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits is applicable beginning on or after October 1, 2011. The payment policy and the annual payment rates for inpatient hospital services provided by IPPS hospitals and by long-term care hospitals (LTCHs) and for implementing certain statutory changes made by the Affordable Care Act and other legislation are applicable to discharges occurring on or after October 1, 2011 unless otherwise specified in this final rule. 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), Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Graduate Medical Education, Capital Prospective Payment, Excluded Hospitals, Medicare Disproportionate Share Hospital (DSH), and Postacute Care Transfer 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. Bridget Dickensheets, (410) 786–8670, Rebasing and Revising of the Market Basket for LTCHs Issues. Siddhartha Mazumdar, (410) 786–6673, Rural Community Hospital Demonstration Program Issues. James Poyer, (410) 786–2261, Inpatient Quality Reporting—Program Administration, Validation, and Reconsideration Issues. Shaheen Halim, (410) 786–0641, Inpatient Quality Reporting— Measures Issues Except Hospital Consumer Assessment of Healthcare Providers and Systems Issues; and Readmission Measures for Hospitals Issues. Elizabeth Goldstein, (410) 786–6665, Inpatient Quality Reporting—Hospital Consumer Assessment of Healthcare Providers and Systems Measures Issues. Mary Pratt, (410) 786–6867, LTCH Quality Data Reporting Issues. Kim Spaulding Bush, (410) 786–3232, Hospital Value-Based Purchasing Efficiency Measures Issues. SUPPLEMENTARY INFORMATION: 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) PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 through the Internet and via asynchronous dial-in. Internet users can access the database by using the World Wide Web, (the Superintendent of Documents’ home Web page address is https://www.gpoaccess.gov/), by using local WAIS client software, or by telnet to swais.access.gpo.gov, then log in as guest (no password required). Dial-in users should use communications software and modem to call (202) 512– 1661; type swais, then log in as guest (no password required). Tables Available Only Through the Internet on the CMS Web Site In the past, a majority of the tables referred to throughout this preamble and in the Addendum to this final rule were published in the Federal Register as part of the annual proposed and final rules. However, beginning in FY 2012, some of the IPPS tables and LTCH PPS tables will no longer be published as part of the annual IPPS and LTCH PPS proposed and final rules. Instead, these tables will be available only through the Internet. The IPPS tables for this final rule are available only through the Internet on the CMS Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS/01_overview.asp. Click on the link on the left side of the screen titled, ‘‘FY 2012 IPPS Final Rule Home Page’’ or ‘‘Acute Inpatient—Files for Download.’’ The LTCH PPS tables for this FY 2012 final rule are available only through the Internet on the CMS Web site at: https://www.cms.gov/ LongTermCareHospitalPPS/ LTCHPPSRN/list.asp under the list item for Regulation Number CMS–1518–F. For complete details on the availability of the tables referenced in this final rule, we refer readers to section VI. of the Addendum to this final rule. Readers who experience any problems accessing any of the tables that are posted on the CMS Web sites identified above should contact Nisha Bhat at (410) 786–4487. Acronyms 3M 3M Health Information System 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations AOA American Osteopathic Association APR DRG All Patient Refined Diagnosis Related Group System ARRA American Recovery and Reinvestment Act of 2009, Public Law 111–5 ASC Ambulatory surgical center ASCA Administrative Simplification Compliance Act of 2002, Public Law 107– 105 ASITN American Society of Interventional and Therapeutic Neuroradiology BBA Balanced Budget Act of 1997, Public Law 105–33 BBRA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999, Public Law 106–113 BIPA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Benefits Improvement and Protection Act of 2000, Public Law 106–554 BLS Bureau of Labor Statistics CAH Critical access hospital CARE [Medicare] Continuity Assessment Record & Evaluation [Instrument] CART CMS Abstraction & Reporting Tool CBSAs Core-based statistical areas CC Complication or comorbidity CCR Cost-to-charge ratio CDAC [Medicare] Clinical Data Abstraction Center CDAD Clostridium difficile-associated disease CIPI Capital input price index CMI Case-mix index CMS Centers for Medicare & Medicaid Services CMSA Consolidated Metropolitan Statistical Area COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law 99– 272 COLA Cost-of-living adjustment CoP [Hospital] condition of participation CPI Consumer price index 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 EHR Electronic health record EMR Electronic medical record FAH Federation of Hospitals FDA Food and Drug Administration FFY Federal fiscal year 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 HHA Home health agency HHS Department of Health and Human Services HICAN Health 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 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 IGI IHS Global Insight, Inc. 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 IQR Inpatient Quality Reporting 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 MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111–309 MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110–173 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 51477 MRHFP Medicare Rural Hospital Flexibility Program MRSA Methicillin-resistant Staphylococcus aureus MSA Metropolitan Statistical Area MS–DRG Medicare severity diagnosisrelated group MS–LTC–DRG Medicare severity long-term care diagnosis-related group NAICS North American Industrial Classification System NALTH National Association of Long Term Hospitals NCD National coverage determination NCHS National Center for Health Statistics NCQA National Committee for Quality Assurance NCVHS National Committee on Vital and Health Statistics NECMA New England County Metropolitan Areas NQF National Quality Forum NTIS National Technical Information Service 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] 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 E:\FR\FM\18AUR2.SGM 18AUR2 51478 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations SNF Skilled nursing facility SOCs Standard occupational classifications SOM State Operations Manual SSO Short-stay outlier TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law 97– 248 TEP Technical expert panel TMA TMA [Transitional Medical Assistance], Abstinence Education, and QI [Qualifying Individuals] Programs Extension Act of 2007, Public Law 110–90 UHDDS Uniform hospital discharge data set mstockstill on DSK4VPTVN1PROD with RULES2 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) Applicable to FY 2012 C. Issuance of a Notice of Proposed Rulemaking 1. Proposed Changes to MS–DRG Classifications and Recalibrations of Relative Weights 2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals 3. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs 4. Proposed FY 2012 Policy Governing the IPPS for Capital-Related Costs 5. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-ofIncrease Percentages 6. Proposed Changes to the LTCH PPS 7. Determining Proposed Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals 8. Determining Proposed Prospective Payments Rates for LTCHs 9. Impact Analysis 10. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services 11. Discussion of Medicare Payment Advisory Commission Recommendations D. Public Comments Received in Response to the FY 2012 IPPS/LTCH PPS Proposed Rule E. Finalization of Interim Final Rule With Comment Period on Revisions to the Reductions and Increases to Hospitals’ FTE Resident Caps for Graduate Medical Education Payment Purposes 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 D. FY 2012 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 and FY 2009 Claims Data 5. 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 6. Recoupment or Repayment Adjustment for FY 2010 Authorized by Section 7(b)(1)(B) of Public Law 110–90 7. Background on the Application of the Documentation and Coding Adjustment to the Hospital-Specific Rates 8. Documentation and Coding Adjustment to the Hospital-Specific Rates for FY 2011 and Subsequent Fiscal Years 9. Application of the Documentation and Coding Adjustment to the Puerto RicoSpecific Standardized Amount a. Background b. Documentation and Coding Adjustment to the Puerto Rico-Specific Standardized Amount E. Refinement of the MS–DRG Relative Weight Calculation 1. Background 2. Summary of the RTI Study of Charge Compression and CCR Refinement 3. Summary of Policy Changes Made in FY 2011 4. Discussion for FY 2012 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. Additions and Revisions to the HAC Policy for FY 2012 a. Contrast-Induced Acute Kidney Injury b. New Diagnosis Codes Added to Existing HACs c. Revision to HAC Subcategory Title d. Conclusion 3. RTI Program Evaluation Summary a. Background b. FY 2009 Data Analysis c. FY 2010 Data Analysis d. FY 2010 RTI Analysis on POA Indicator Reporting of Current HACs. e. FY 2010 RTI Analysis of Frequency of Discharges and POA Indicator Reporting for Current HACs f. RTI Analysis of Circumstances When Application of HAC Provisions Would Not Result in MS–DRG Reassignment for Current HACs PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 g. RTI Analysis of Coding Changes for HAC-Associated Secondary Diagnoses for Current HACs h. RTI Analysis of Estimated Net Savings for Current HACs i. Previously Considered Candidate HACs—RTI Analysis of Frequency of Discharges and POA Indicator Reporting j. Current and Previously Considered Candidate HACs—RTI Report on Evidence-Based Guidelines k. Final Policy Regarding Current HACs and Previously Considered Candidate HACs G. Changes to Specific MS–DRG Classifications 1. Pre-Major Diagnostic Categories (PreMDCs) a. Noninvasive Mechanical Ventilation b. Debridement With Mechanical Ventilation Greater Than 96 Hours With Major Operating Room (O.R.) Procedure c. Autologous Bone Marrow Transplant 2. MDC 1 (Diseases and Disorders of the Nervous System): Rechargeable Dual Array Deep Brain Stimulation System 3. MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth, and Throat): Skull Based Surgeries 4. MDC 5 (Diseases and Disorders of the Circulatory System) a. Percutaneous Mitral Valve Repair With Implant b. Aneurysm Repair Procedure Codes 5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Artificial Discs b. Major Joint Replacement or Reattachment of Lower Extremities c. Combined Anterior/Posterior Spinal Fusion 6. MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue, and Breast): Excisional Debridement of Wound, Infection, or Burn 7. MDC 10 (Endocrine, Nutritional, and Metabolic Diseases and Disorders) a. Nutritional and Metabolic Diseases: Update of MS–DRG Titles b. Sleeve Gastrectomy Procedure for Morbid Obesity 8. MDC 15 (Newborns and Other Neonates with Conditions Originating in the Perinatal Period): Discharge Status Code 66 (Discharged/Transferred to Critical Access Hospital (CAH)) 9. Medicare Code Editor (MCE) Changes 10. Surgical Hierarchies 11. Complications or Comorbidity (CC) Exclusions List a. Background b. CC Exclusions List for FY 2012 12. 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 Into 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 13. Changes to the ICD–9–CM Coding System, Including Discussion of the E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 d. ICD–10 MS–DRGs 14. Other Issues a. O.R./Non-O.R. Status of Procedures b. IPPS Recalled Device Policy Clarification 15. Public Comments on Issues Not Addressed in Proposed Rule 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 2012 Status of Technologies Approved for FY 2011 Add-On Payments a. Spiration® IBV Valve System b. Cardio WestTM Temporary Artificial Heart System (Cardio WestTM TAH-t) c. Auto Laser Interstitial Thermal Therapy (AutoLITTTM) System 4. FY 2012 Applications for New Technology Add-On Payments a. AxiaLIF® 2L+TM System b. PerfectCLEAN with Micrillon® III. Changes to the Hospital Wage Index for Acute Care Hospitals A. Background B. Core-Based Statistical Areas for the Hospital Wage Index C. Occupational Mix Adjustment to the FY 2012 Wage Index 1. Development of Data for the FY 2012 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 2012 D. Worksheet S–3 Wage Data for the FY 2012 Wage Index 1. Included Categories of Costs 2. Changes to the Reporting Requirements for Pension Costs for the Medicare Wage Index a. Background b. Allowable Pension Cost for the Medicare Wage Index 3. Excluded Categories of Costs 4. Use of Wage Index Data by Providers Other Than Acute Care Hospitals under the IPPS E. Verification of Worksheet S–3 Wage Data F. Method for Computing the FY 2012 Unadjusted Wage Index 1. Steps for Computation 2. Imputed Floor Policy 3. FY 2012 Puerto Rico Wage Index G. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2012 Occupational Mix Adjusted Wage Index H. Revisions to the Wage Index Based on Hospital Redesignations and Reclassifications 1. General 2. Effects of Reclassification/Redesignation VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 3. FY 2012 MGCRB Reclassifications a. FY 2012 Reclassification Requirements and Approvals b. Applications for Reclassifications for FY 2013 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 7. Waiving Lugar Redesignation for the Out-Migration Adjustment 8. Other Geographic Reclassification Issues a. Requested Reclassification for Single Hospital MSAs b. Requests for Exceptions to Geographic Reclassification Rules I. FY 2012 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees J. Process for Requests for Wage Index Data Corrections K. Labor-Related Share for the FY 2012 Wage Index IV. Other Decisions and Changes to the IPPS for Operating Costs and GME Costs A. Hospital Inpatient Quality Reporting Program 1. Background a. Overview b. Statutory History and History of Measures Adopted for the Hospital IQR Program c. Maintenance of Technical Specifications for Quality Measures d. Public Display of Quality Measures 2. Retirement of Hospital IQR Program Measures a. Considerations in Retiring Quality Measures from the Hospital IQR Program b. Retirement of Hospital IQR Program Measures for the FY 2014 Payment Determination and Subsequent Years 3. Measures for the FY 2014 and FY 2015 Hospital IQR Payment Determinations a. Considerations in Expanding and Updating Quality Measures Under the Hospital IQR Program b. Hospital IQR Program Measures for the FY 2014 Hospital IQR Payment Determination c. Hospital IQR Program Quality Measures for the FY 2015 Payment Determination 4. Possible New Quality Measures and Measure Topics for Future Years 5. Form, Manner, and Timing of Quality Data Submission a. Background b. Procedural Requirements for the FY 2012 Payment Determinations and Subsequent Years c. Procedural Requirements for FY 2013 and Subsequent Years d. Data Submission Requirements for Chart-Abstracted Measures e. Sampling and Case Thresholds Beginning With the FY 2015 Payment Determination f. HCAHPS Requirements for the FY 2013, FY 2014, and FY 2015 Payment Determinations g. Procedures for Claims-Based Measures h. Data Submission Requirements for Structural Measures i. Data Submission and Reporting Requirements for Healthcare-Associated PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 51479 Infection (HAI) Measures Reported via NHSN 6. Chart Validation Requirements for ChartAbstracted Measures a. Changes to the Chart Validation Requirements and Methods for the FY 2012 Payment Determination and Subsequent Years b. Supplements to the Chart Validation Process for the FY 2014 Payment Determination and Subsequent Years 7. QIO Regulation Changes for Provider Medical Record Deadlines Possibly Including Serious Reportable Events 8. Data Accuracy and Completeness Acknowledgement Requirements for the FY 2012 Payment Determination and Subsequent Years 9. Public Display Requirements for the FY 2014 Payment Determination and Subsequent Years 10. Reconsideration and Appeal Procedures for the FY 2012 Payment Determination 11. Hospital IQR Program Disaster Waivers 12. Electronic Health Records (EHRs) a. Background b. HITECH Act EHR Provisions B. Hospital Value-Based Purchasing (VBP) Program 1. Background 2. Overview of the Hospital VBP Program Proposed Rule 3. FY 2014 Hospital VBP Program Measures a. Background b. Efficiency Measure—Medicare Spending per Beneficiary Measure—for the FY 2014 Hospital VBP Program 4. Efficiency Domain (Medicare Spending per Beneficiary Measure) Performance Period and Baseline Period 5. Simultaneous Specification of Additional Measures for the Hospital VBP Program and the Hospital IQR Program 6. Responses to Additional Hospital VBP Program Comments C. Hospital Readmissions Reduction Program 1. Background a. Overview b. Statutory Basis for the Hospital Readmissions Reduction Program 2. Implementation of the Hospital Readmissions Reduction Program a. Overview b. Provisions in the FY 2012 IPPS/LTCH PPS Rulemaking c. Provisions to be Included in the FY 2013 IPPS/LTCH PPS Proposed Rule d. Expansion of the Applicable Conditions To Be Included in the Future Rulemaking 3. Provisions of the Hospital Readmissions Reduction Program a. Applicable Conditions for FY 2013 Hospital Readmissions Reduction Program b. Definition of ‘‘Readmissions’’ c. Readmission Measures and Related Methodology D. Rural Referral Centers (RRCs) (§ 412.96) 1. Case-Mix Index (CMI) 2. Discharges E. Payment Adjustment for Low-Volume Hospitals (§ 412.101) E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51480 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 1. Background 2. Temporary Changes for FYs 2011 and 2012 3. Discharge Data Source Used to Identify Qualifying Low-Volume Hospitals and Calculate the Payment Adjustment (Percentage Increase) for FY 2012 F. Indirect Medical Education (IME) Adjustment 1. Background 2. IME Adjustment Factor for FY 2012 G. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) and Indirect Medical Education (IME) (§§ 412.105 and 412.106) 1. Background 2. Policy Change Relating to the Exclusion of Hospice Beds and Patient Days From the Calculation of the Medicare DSH Payment Adjustment and the IME Payment Adjustment a. Background b. Hospice Inpatient Services H. Medicare-Dependent, Small Rural Hospitals (MDHs) (§ 412.108) 1. Background 2. Extension of the MDH Program I. Certified Register Nurse Anesthetists (CRNA) Services Furnished in Rural Hospitals and CAHs (§ 412.113) J. Additional Payments for Qualifying Hospitals With Lowest per Enrollee Medicare Spending 1. Background 2. Method for Identifying Qualifying Hospitals and Eligible Counties 3. Determination of Annual Payment Amounts 4. Eligible Counties and Qualifying Hospitals 5. Payment Determination and Distributions for FY 2011 and FY 2012 K. Changes in the Inpatient Hospital Update 1. FY 2012 Inpatient Hospital Update 2. FY 2012 Puerto Rico Hospital Update 3. Productivity Adjustment L. Additional Payments to Hospitals With High Percentage of End-Stage Renal Disease (ESRD) Discharges (§ 412.104) M. Changes to the Reporting Requirements for Pension Costs for Medicare CostFinding Purposes 1. Background 2. Allowable Defined Benefit Pension Plan Cost for Medicare Cost-Finding Purposes N. Rural Community Hospital Demonstration Program 1. Background 2. Changes to the Demonstration Program Made by the Affordable Care Act 3. FY 2012 Budget Neutrality Adjustment a. Component of the FY 2012 Budget Neutrality Adjustment that Accounts for Estimated Demonstration Program Costs of the ‘‘Pre-Expansion’’ Participating Hospitals b. Portion of the FY 2012 Budget Neutrality Adjustment That Accounts for Estimated FY 2012 Demonstration Program Costs for Hospitals Newly Selected to Participate in the Demonstration Program c. Portion of the FY 2012 Budget Neutrality Adjustment to Offset the Amount by Which the Costs of the Demonstration VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Program in FYs 2007 and 2008 Exceeded the Amount That Was Identified in the FYs 2007 and 2008 IPPS Final Rules as the Budget Neutrality Offset for FYs 2007 and 2008 O. Bundling of Payments for Services Provided to Outpatients Who Later Are Admitted as Inpatients: 3-Day Payment Window 1. Background 2. Establishment of Condition Code 51 (Attestation of Unrelated Outpatient Nondiagnostic Services) 3. Applicability of the Payment Window Policy to Services Furnished at Physicians’ Practices P. Changes to MS–DRGs Subject to the Postacute Care Transfer Policy 1. Background 2. Changes to the Postacute Care Transfer MS–DRGs Q. Hospital Services Furnished Under Arrangements R. Finalization of Interim Final Rule With Comment Period on Revisions to the Reductions and Increases to Hospitals’ FTE Resident Caps for Graduate Medical Education Purposes 1. Background and Provisions of the Interim Final Rule With Comment Period a. Statutory Authority b. Reductions and Increases to Hospitals’ FTE Resident Caps for GME Payment Purposes Under Section 5503 of the Affordable Care Act c. Treatment of Affiliated Groups Under Section 5503 of the Affordable Care Act d. Section 203 of the Medicare and Medicaid Extenders Act of 2010 (Pub. L. 111–309) 2. Summary of the Provisions of the Interim Final Rule With Comment Period 3. Summary of Public Comments, Departmental Responses, and Statements of Final Policies a. Summary of Public Comments and Departmental Responses b. Final Policies 4. Collection of Information Requirements 5. Regulatory Impact Statement a. Statement of Need b. Overall Impact c. Anticipated Effects d. Alternatives Considered e. Conclusion 6. Comment on Issues Outside of the Scope of the Interim Final Rule With Comment Period 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 2012: MS–DRG Documentation and Coding Adjustment 1. Background 2. Prospsective MS–DRG Documentation and Coding Adjustment to the National Capital Federal Rate for FY 2012 and Subsequent Years 3. Documentation and Coding Adjustment to the Puerto Rico-Specific Capital Rate F. Other Proposed Changes for FY 2012 VI. Changes for Hospitals Excluded From the IPPS PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 A. Excluded Hospitals B. Critical Access Hospital (CAH) Payment for Ambulance Services 1. Background 2. Requirement for CAH Ambulance Within a 35-Mile Location of a CAH or Entity C. Report of Adjustment (Exceptions) Payments VII. Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2012 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 2012 3. Development of the FY 2012 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 2012 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 Proposed FY 2012 MS–LTC–DRG Relative Weights C. Quality Reporting Program for LTCHs 1. Background and Statutory Authority 2. Quality Measures for the LTCH Quality Reporting Program for FY 2014 a. Considerations in the Selection of the Quality Measures b. LTCH Quality Measures for FY 2014 Payment Determination 3. Possible LTCH Quality Measures Under Consideration for Future Years 4. Data Submission Methods and Timelines a. Method of Data Submission for HAIs b. Timeline for Data Reporting Related to HAIs c. Method of Data Collection and Submission for the Pressure Ulcer Measure Data d. Timeline for Data Reporting Related to Pressure Ulcers 5. Public Reporting and Availability of Data Submitted D. Rebasing and Revising of the Market Basket Used Under the LTCH PPS 1. Background 2. Overview of the FY 2008-Based RPL Market Basket 3. Rebasing and Revising of the RPL Market Basket a. Development of Cost Categories E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations b. Final Cost Category Computation c. Selection of Price Proxies d. Methodology for Capital Portion of the RPL Market Basket e. FY 2012 Market Basket Update for LTCHs f. Labor-Related Share E. Changes to the LTCH Payment Rates and Other Changes to the FY 2012 LTCH PPS 1. Overview of Development of the LTCH Payment Rates 2. FY 2012 LTCH PPS Annual Market Basket Update a. Overview b. Revision of Certain Market Basket Updates as Required by the Affordable Care Act c. Market Basket Under the LTCH PPS for FY 2012 d. Productivity Adjustment e. Annual Market Basket Update for LTCHs for FY 2012 3. Budget Neutrality Adjustment for the Changes to the Area Wage Level Adjustment 4. Greater Than 25 Day Average Length of Stay Requirement for LTCHs a. Determining the Average Length of Stay When There is a Change of Ownership b. Inclusion of Medicare Advantage (MA) Days in the Average Length of Stay Calculation F. Application of LTCH Moratorium on the Increase in Beds at Section 114(d)(1)(B) of Public Law 110–173 (MMSEA) to LTCHs and LTCH Satellite Facilities Established or Classified as Such Under Section 114(d)(2) of Public Law 110–173 VIII. MedPAC Recommendations IX. Other Required Information A. Requests for Data From the Public B. Collection of Information Requirements 1. Statutory Requirement for Solicitation of Comments 2. ICRs for Add-On Payments for New Services and Technologies 3. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program 4. ICRs for the Occupational Mix Adjustment to the FY 2012 Index (Hospital Wage Index Occupational Mix Survey) 5. Hospital Applications for Geographic Reclassifications by the MGCRB 6. ICRs for the Quality Reporting Program for LTCHs Regulation Text Addendum—Schedule of Standardized Amounts, Update Factors, and Rate-ofIncrease Percentages Effective With Cost Reporting Periods Beginning on or After October 1, 2011 I. Summary and Background II. Changes to the Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2012 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 2012 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 A. Determination of Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update B. Calculation of the Inpatient CapitalRelated Prospective Payments for FY 2012 C. Capital Input Price Index IV. Changes to Payment Rates for Certain Excluded Hospitals: Rate-of-Increase Percentages for FY 2012 V. Changes to the Payment Rates for the LTCH PPS for FY 2012 A. LTCH PPS Standard Federal Rate for FY 2012 B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 2012 C. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases D. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 2012 VI. Tables Referenced in This Final Rulemaking and Available Through the Internet on the CMS Web Site Appendix A—Economic Analyses I. Regulatory Impact Analysis A. Introduction B. Need C. Objectives of the IPPS D. Limitations of Our Analysis for the IPPS E. Hospitals Included in and Excluded From the IPPS F. Effects on Hospitals and Hospital Units Excluded From the IPPS G. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs 1. Basis and Methodology of Estimates 2. Analysis of Table I 3. Impact Analysis of Table II H. Effects of Other Policy Changes 1. Effects of Policy on HACs, Including Infections 2. Effects of Policy Changes Relating to New Medical Service and Technology Add-On Payments 3. Effects of Requirements for Hospital Inpatient Quality Reporting (IQR) Program 4. Effects of Additional Hospital ValueBased Purchasing (VBP) Program Requirements 5. Effects of Requirements for Hospital Readmissions Reduction Program 6. Effects of Policy Changes Relating to Payment Adjustments for Medicare Disproportionate Share Hospitals (DSHs) and Indirect Medical Education (IME) 7. Effects of the FY 2012 Low-Volume Hospital Payment Adjustment 8. Effects of Changes Relating to MDHs 9. Effects of Policy Relating to CRNA Services Furnished in Rural Hospitals and CAHs 10. Effects of Changes Relating to ESRD Add-On Payment 11. Effects of Changes Relating to the Reporting Requirements for Pension Costs for Medicare Cost-Finding and Wage Reporting Purposes 12. Effects of Implementation of Rural Community Hospital Demonstration Program 13. Effects of Changes to List of MS–DRGs Subject to the Postacute Care Transfer and DRG Special Pay Policy PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 51481 14. Effects of Changes Relating to Hospital Services Furnished Under Arrangements 15. Effects of Change Relating to CAH Payment for Ambulance Services 16. Effects of Finalization of Revisions to the Reductions and Increases to Hospitals’ FTE Resident Caps for Graduate Medical Education Payment Purposes I. Effects of Changes in the Capital IPPS 1. General Considerations 2. Results J. Effects of Payment Rate Changes and Policy Changes Under the LTCH PPS 1. Introduction and General Considerations 2. Impact on Rural Hospitals 3. Anticipated Effects of LTCH PPS Payment Rate Change and Policy Changes 4. Effect on the Medicare Program 5. Effect on Medicare Beneficiaries K. Alternatives Considered L. Overall Conclusion 1. Acute Care Hospitals 2. LTCHs M. Accounting Statements and Tables 1. Acute Care Hospitals 2. LTCHs II. Regulatory Flexibility Act (RFA) Analysis III. Unfunded Mandate Reform Act (UMRA) Analysis IV. 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 2012 A. Final FY 2012 Inpatient Hospital Update B. Final Update for SCHs and MDHs for FY 2012 C. Final FY 2012 Puerto Rico Hospital Update D. Final Update for Hospitals Excluded From the IPPS III. Secretary’s Recommendation IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare I. Background A. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of hospital inpatient stays under a prospective payment system (PPS). Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs). The base payment rate is comprised of a standardized amount that is divided E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51482 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 certain 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 varies based on the outcome of the statutory calculations. If the hospital is an approved teaching hospital, it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds. Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. To qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments. Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospitalspecific rate, which is determined from 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 hospitalspecific 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. PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 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, Public Law 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. 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 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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. mstockstill on DSK4VPTVN1PROD with RULES2 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) Applicable to FY 2012 The Patient Protection and Affordable Care Act (Pub. L. 111–148), enacted on March 23, 2010, and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111–152), enacted on March 30, 2010, made a number of changes that affect 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 affect the updates to the IPPS and the LTCH PPS and providers and suppliers. The provisions of the Affordable Care Act that were applicable to the IPPS and the LTCH PPS for FYs 2010 and 2011 were implemented in the following documents: On June 2, 2010, we issued in the Federal Register 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, which were VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 required by or directly resulted from implementation of provisions of the Affordable Care Act. On August 16, 2010, we issued in the Federal Register a final rule (75 FR 50042) that implemented provisions of the Affordable Care Act applicable to the IPPS and LTCH/PPS for FY 2011. In this final rule, we are implementing the following provisions (or portions of the following provisions) of the Affordable Care Act that are applicable to the IPPS and LTCH PPS for FY 2012: • Section 3001 of Public Law 111– 148, which provides for establishment of a hospital value-based purchasing program and applicable measures for value-based incentive payments with respect to discharges occurring during FY 2013. • Section 3004 of Public Law 111– 148, which provides for the submission of quality data for LTCHs beginning in FY 2013 in order to receive the full annual update to the payment rates beginning with FY 2014 and the establishment of quality data measures by FY 2012 for the FY 2014 payment determination. • Section 3025 of Public Law 111– 148, which provides for a hospital readmissions reduction program and related quality data reporting measures. • Section 3124 of Public Law 111– 148, which provides for extension of the Medicare-dependent, small rural hospital (MDH) program through FY 2012. • Section 3401 of Public Law 111– 148, which provides for the incorporation of productivity improvements into the market basket updates for IPPS hospitals and LTCHs. In addition, we are continuing in FY 2012 to implement the following provisions, which were initiated in FY 2011: • Section 10324 of Public Law 111– 148, which provided for a wage adjustment for hospitals located in frontier States. • Sections 3401 and 10319 of Public Law 111–148 and section 1105 of Public Law 111–152, which revise certain market basket update percentages for IPPS and LTCH PPS payment rates for FY 2012. • Sections 3125 and 10314 of Public Law 111–148, which provide for temporary percentage increases in payment adjustments to low-volume hospitals for discharges occurring in FY 2012. • Section 1109 of Public Law 111– 152, which provides for additional payments in FY 2012 for qualifying hospitals in the lowest quartile of per capita Medicare spending. PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 51483 • Section 5503 of Public Law 111– 148, as amended by Public Law 111–152 and section 203 of Public Law 111–309, which provides for the reduction in FTE resident caps for direct GME under Medicare for certain hospitals, and to authorize the ‘‘redistribution’’ of the estimated number of FTE resident slots to other qualified hospitals. In addition, section 5503 requires the application of these provisions to IME in the same manner as the FTE resident caps for direct GME. C. Issuance of a Notice of Proposed Rulemaking The May 5, 2011 Federal Register (76 FR 25788) included the proposed rule that set forth proposed changes to the Medicare IPPS for operating costs and for capital-related costs of acute care hospitals in FY 2012. We also set forth proposed changes relating to payments for IME costs and payments to certain hospitals that continue to be excluded from the IPPS and paid on a reasonable cost basis. In addition, we set forth proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for FY 2012. Below is a summary of the major changes that we proposed to make: 1. 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 2012 resulting from implementation of the MS–DRG system. • A discussion of the Research Triangle Institute, International (RTI) reports and recommendations relating to charge compression. • Proposed recalibrations of the MS– DRG relative weights. • Proposed changes to hospitalacquired conditions (HACs) and a listing and discussion of HACs, including infections, that would be subject to the statutorily required quality adjustment in MS–DRG payments for FY 2012. We discussed the FY 2012 status of new technologies approved for add-on payments for FY 2011 and presented our evaluation and analysis of the FY 2012 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Public Law 108–173, obtained in a town hall meeting). E:\FR\FM\18AUR2.SGM 18AUR2 51484 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 2. 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: • The proposed FY 2012 wage index update using wage data from cost reporting periods beginning in FY 2008. • Analysis and implementation of the proposed FY 2012 occupational mix adjustment to the wage index for acute care hospitals, including discussion of the 2010 occupational mix survey. • A proposal to change the reporting requirements for pension costs for the Medicare wage index. • 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 2012 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 2012 hospital wage index. • Determination of the labor-related share for the proposed FY 2012 wage index. 3. 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 476, including the following: • The reporting of hospital quality data under the Hospital Inpatient Quality Reporting (IQR) Program as a condition for receiving the full annual payment update increase. • The proposed implementation of the Hospital Value-Based Purchasing Program measures. • The proposed establishment of hospital readmission measures for reporting of hospital quality data. • 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 2012. • Proposed payment adjustment for low-volume hospitals. • Proposal for counting hospice days in the formula for determining the payment adjustment for disproportionate share hospitals. • Proposal for making additional payments for qualifying hospitals with VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 lowest per enrollee Medicare spending for FY 2012. • Proposal to clarify ESRD add-on payment requirements based on cost report requirements. • Proposal relating to changes to the reporting requirements for pension costs for Medicare cost-finding purposes. • Proposal to implement statutory change to the hospital payment update, including incorporation of a productivity adjustment. • Discussion of the Rural Community Hospital Demonstration Program and a proposal for making a budget neutrality adjustment for the demonstration program. • Discussion of August 2010 interim final rule with comment period and further proposed changes relating to the 3-day payment window for payments for services provided to outpatients who are later admitted as inpatients. 4. Proposed FY 2012 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 2012 and the proposed MS–DRG documentation and coding adjustment for FY 2012. 5. 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 certain excluded hospitals. In addition, we discussed proposed changes relating to payment for TEFRA services furnished under arrangements and payment for ambulance services furnished by CAHowned and operated entities. 6. 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 2012, including the annual update of the MS–LTC–DRG classifications and relative weights for use under the LTCH PPS for FY 2012 and the proposed rebasing and revising of the market basket for LTCHs. In addition, we set forth proposals for implementing the quality data reporting program for LTCHs. We also proposed to clarify two policies regarding the calculation of the average length of stay requirement for LTCHs, and proposed a policy to address a LTCH moratorium issue. PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 7. 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 2012 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 2012 for certain hospitals excluded from the IPPS. 8. 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 2012 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 amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS. 9. 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. 10. 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 2012 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. 11. 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 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations and makes recommendations on Medicare payment policies. MedPAC’s March 2011 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 2011 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. D. Public Comments Received in Response to the FY 2012 IPPS/LTCH PPS Proposed Rule We received approximately 385 timely pieces of correspondence containing multiple comments on the FY 2012 IPPS/LTCH PPS proposed rule. We note that some of these public comments were outside of the scope of the proposed rule. These out-of-scope public comments are not addressed with policy responses in this final rule. Summaries of the public comments that are within the scope of the proposed rule and our responses to those comments are set forth in the various sections of this final rule under the appropriate heading. mstockstill on DSK4VPTVN1PROD with RULES2 E. Finalization of Interim Final Rule With Comment Period on Revisions to the Reductions and Increases to Hospitals’ FTE Resident Caps for Graduate Medical Education Payment Purposes On March 14, 2011, we issued in the Federal Register (76 FR 13515) an interim final rule with comment period to implement section 203 of the Medicare and Medicaid Extenders Act of 2010 (MMEA), Public Law 111–309, relating to the treatment of teaching hospitals that are members of the same Medicare graduate medical education (GME) affiliated groups for the purpose of determining possible full-time equivalent (FTE) resident cap reductions. We received nine timely pieces of correspondence in response this interim final rule with comment period. In section IV.R. of this document, we are summarizing and responding to these public comments and are finalizing the policies contained in the interim final rule with comment period without modification. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 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 1 Medicare Payment Advisory Commission: Report to the Congress, Physician-Owned Specialty Hospitals, March 2005, page viii. PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 51485 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 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 E:\FR\FM\18AUR2.SGM 18AUR2 51486 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 2012, cases will be assigned to one of 751 MS– DRGs in 25 MDCs. The table below lists the 25 MDCs. MAJOR DIAGNOSTIC CATEGORIES [MDCs] 1 .................................... 2 .................................... 3 .................................... 4 .................................... 5 .................................... 6 .................................... 7 .................................... 8 .................................... 9 .................................... 10 .................................. 11 .................................. 12 .................................. 13 .................................. 14 .................................. 15 .................................. 16 .................................. 17 .................................. 18 .................................. 19 .................................. 20 .................................. 21 .................................. 22 .................................. 23 .................................. 24 .................................. 25 .................................. 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. 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 28.0), there are 13 MS–DRGs to which cases are directly assigned on the basis of ICD–9–CM procedure codes. These MS–DRGs are for heart transplant or implant of heart assist systems; liver and/or intestinal transplants; bone marrow transplants; lung transplants; simultaneous pancreas/kidney transplants; pancreas transplants; and tracheostomies. Cases are assigned to these MS–DRGs before they are classified to an MDC. The table below lists the 13 current pre-MDCs. PRE-MAJOR DIAGNOSTIC CATEGORIES [Pre-MDCs] MS–DRG 001 .................................. MS–DRG 002 .................................. MS–DRG 003 .................................. MS–DRG 004 .................................. mstockstill on DSK4VPTVN1PROD with RULES2 MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 divided into surgical DRGs and medical DRGs. Surgical DRGs are based on a hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. Medical DRGs generally are differentiated on the basis of diagnosis and age (0 to 17 years of age or greater than 17 years of age). Some surgical and medical DRGs are further differentiated PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 based on the presence or absence of a complication or comorbidity (CC) or a major complication or comorbidity (MCC). Generally, nonsurgical procedures and minor surgical procedures that are not usually performed in an operating room are not treated as O.R. procedures. However, there are a few non-O.R. procedures that do affect MS–DRG E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations assignment for certain principal diagnoses. An example is extracorporeal shock wave lithotripsy for patients with a principal diagnosis of urinary stones. Lithotripsy procedures are not routinely performed in an operating room. Therefore, lithotripsy codes are not classified as O.R. procedures. However, our clinical advisors believe that patients with urinary stones who undergo extracorporeal shock wave lithotripsy should be considered similar to other patients who undergo O.R. procedures. Therefore, we treat this group of patients similar to patients undergoing O.R. procedures. Once the medical and surgical classes for an MDC were formed, each diagnosis 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 increase the payment amount to hospitals above the base MS–DRG payment. The records for all Medicare hospital inpatient discharges are maintained in the Medicare Provider Analysis and Review (MedPAR) file. The data in this file are used to evaluate possible MS– DRG classification changes and to recalibrate the MS–DRG weights. However, in the FY 2000 IPPS final rule (64 FR 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 depend 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 2012 proposed rule was based on data from the September 2010 update of the FY 2010 MedPAR file, which contained hospital bills received through September 30, 2010, for discharges occurring through September 30, 2010. For this FY 2012 final rule, our MS–DRG analysis is based on data from the March 2011 update of the FY 2010 MedPAR file, which contained hospital bills received through March 31, 2011, for discharges occurring through September 30, 2010. PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 51487 2. Yearly Review for Making MS–DRG Changes Many of the changes to the MS–DRG classifications we make annually are the result of specific issues brought to our attention by interested parties. We encourage individuals with comments about MS–DRG classifications to submit these comments no later than early December of each year so they can be carefully considered for possible inclusion in the annual proposed rule and, if included, may be subjected to public review and comment. Therefore, similar to the timetable for interested parties to submit non-MedPAR data for consideration in the MS–DRG recalibration process, comments about MS–DRG classification issues should be submitted no later than early December in order to be considered and possibly included in the next annual proposed rule updating the IPPS. The actual process of forming the MS–DRGs was, and will likely continue to be, highly iterative, involving a combination of statistical results from test data combined with clinical judgment. In the FY 2008 IPPS final rule (72 FR 47140 through 47189), we described in detail the process we used to develop the MS–DRGs that we adopted for FY 2008. In addition, in 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51488 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations of recommendations made by MedPAC regarding revisions to the DRG system used under the IPPS (70 FR 47473 through 47482; 71 FR 47881 through 47939; and 72 FR 47140 through 47189). As we noted in the FY 2006 IPPS final rule, we had insufficient time to complete a thorough evaluation of these recommendations for full implementation in FY 2006. However, we did adopt severity-weighted cardiac DRGs in FY 2006 to address public comments on this issue and the specific concerns of MedPAC regarding cardiac surgery DRGs. We also indicated that we planned to further consider all of MedPAC’s recommendations and thoroughly analyze options and their impacts on the various types of hospitals in the FY 2007 IPPS proposed rule. For FY 2007, we began this process. In the FY 2007 IPPS proposed rule, we proposed to adopt Consolidated Severity DRGs (CS DRGs) for FY 2008 (if not earlier). Based on public comments received on the FY 2007 IPPS proposed rule, we decided not to adopt the CS DRGs. In the FY 2007 IPPS final rule (71 FR 47906 through 47912), we discussed several concerns raised by 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 that contained 1,666,476 cases and represented a number of body systems. In creating these 20 new DRGs, we deleted 8 existing DRGs and modified 32 existing DRGs. We indicated that these interim steps for FY 2007 were being taken as a prelude to more comprehensive changes to better account for severity in the DRG system by FY 2008. In the FY 2007 IPPS final rule (71 FR 47898), we indicated our intent to pursue further DRG reform through two initiatives. First, we announced that we were in the process of engaging a contractor to assist us with evaluating alternative DRG systems that were raised as potential alternatives to the CMS DRGs in the public comments. Second, we indicated our intent to review over 13,000 ICD–9–CM diagnosis codes as part of making further refinements to the current CMS DRGs to better recognize severity of illness based on the work that CMS (then HCFA) did in the mid-1990’s in connection with adopting severity DRGs. We describe below the progress we have made on these two initiatives and our actions for FYs 2008, 2009, 2010, and 2011, and our proposed and final actions for FY 2012 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 2012 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 PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 final rule. There was significant concern in the public comments that our costbased weighting methodology does not adequately account for charge compression—the practice of applying a higher percentage charge markup over costs to lower cost items and services and a lower percentage charge markup over costs to higher cost items and services. Further, public commenters expressed concern about potential inconsistencies between how costs and charges are reported on the Medicare cost reports and charges on the Medicare claims. In the FY 2007 IPPS final rule, we used costs and charges from the cost 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 2012. We believe that revisions to the DRG system to better recognize severity of illness and changes to the relative weights based on costs rather than charges are improving the accuracy of the payment rates in the IPPS. We agree with MedPAC that these refinements should be pursued. Although we continue to caution that any prospective payment system based on grouping cases will always present some opportunities for providers to specialize in cases they believe have higher margins, we believe that the changes we have adopted and the continuing reforms we are proposing to make in this proposed rule for FY 2012 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 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations on severity levels of illness (72 FR 47141). mstockstill on DSK4VPTVN1PROD with RULES2 D. FY 2012 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 751 MS– DRGs, which include 4 additional MS– DRGs that we are adopting for FY 2012.) 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 2008 IPPS final rule with comment period to ¥0.6 percent for FY 2008 and ¥0.9 percent for FY 2009. Section 7(a) of Public Law 110–90 did not adjust the FY 2010 ¥1.8 percent documentation and coding adjustment promulgated in the FY 2008 IPPS final rule with comment period. To comply with section 7(a) of Public Law 110–90, we promulgated a final rule on November 27, 2007 (72 FR 66886) that modified the IPPS documentation and coding adjustment for FY 2008 to ¥0.6 percent, and revised the FY 2008 payment rates, factors, and thresholds accordingly. These revisions were effective on October 1, 2007. For FY 2009, section 7(a) of Public Law 110–90 required a documentation and coding adjustment of ¥0.9 percent instead of the ¥1.8 percent adjustment established in the FY 2008 IPPS final rule with comment period. As discussed in the FY 2009 IPPS final rule (73 FR 48447) and required by statute, we applied a documentation and coding adjustment of ¥0.9 percent to the FY 2009 IPPS national standardized amount. The documentation and coding adjustments established in the FY 2008 IPPS final rule with comment period, as amended by Public Law 110–90, are cumulative. As a result, the ¥0.9 percent documentation and coding 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 PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 51489 reflected the change that occurred in those years. 3. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 Required by Public Law 110–90 If, based on a retroactive evaluation of claims data, the Secretary determines that implementation of the MS–DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different from the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110–90, section 7(b)(1)(B) of Public Law 110–90 requires the Secretary to make an additional adjustment to the standardized amounts under section 1886(d) of the Act. This adjustment must offset the estimated increase or decrease in aggregate payments for FYs 2008 and 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustment applied under section 7(a) of Public Law 110–90. This adjustment is in addition to making an appropriate adjustment to the standardized amounts under section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A) of Public Law 110–90. That is, these adjustments are intended to recoup (or repay, in the case of underpayments) 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 and FY 2009 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51490 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations data and invited public input on our proposed methodology. In that proposed rule, we indicated that we intended to measure and corroborate the extent of the overall national average changes in case-mix for FY 2008 and FY 2009. We expected that the two largest parts of this overall national average change would be attributable to underlying changes in actual patient severity 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 likely to be the result of the MS–DRG system. We also anticipated evaluating data to identify the specific MS–DRGs and diagnoses that contributed significantly to the documentation and coding payment effect and to quantify their impact. This step entailed analysis of the secondary diagnoses driving the shifts in severity within specific base DRGs. In 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), we 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 FY 2010 IPPS/RY 2010 LTCH PPS final rule, we updated this analysis with FY 2008 data for claims paid through March 2009, and we noted that the estimates for all IPPS remained essentially the same to those in the proposed rule (42 FR 43770, 43775). Also, 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. We refer readers to that final rule for a detailed description of our analysis and prior responses to comments. PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50057 through 50068), we performed the same analysis for FY 2009 claims data using the same methodology as we did for FY 2008 claims. 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 the FY 2011 IPPS/LTCH PPS final rule, we updated the analysis with FY 2009 claims paid through March 2010, as we discussed in the proposed rule. We note that, for all IPPS hospitals, other than those in Puerto Rico, the estimates were unchanged from those in the proposed rule. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50057 through 50068) for a detailed description of our analysis and prior responses to comments. The results of the analysis for the FY 2011 proposed and final rules 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/LimitedData Sets/ 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. 5. 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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. In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24096), we solicited public comment on our proposal to make a ¥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 the FY 2010 IPPS/RY 2010 LTCH PPS final rule, in response to public comments, 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, and 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 refer readers to the FY 2010 IPPS/LTCH PPS final rule (74 FR 43767 through 43777) for a detailed description of our proposal, responses to comments, and finalized policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/LTCH PPS final rule (75 FR 50057 through 50073), we 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 found 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, as we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we believe we have some discretion as to the manner in which we apply the prospective adjustment of ¥3.9 percent. We indicated that applying the full prospective adjustment of ¥3.9 percent VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 for FY 2011, in combination with the proposed recoupment adjustment of ¥2.9 percent in FY 2011 (discussed below) would require an aggregate adjustment of ¥6.8 percent. As we discuss elsewhere in this section II.D., and more extensively in the FY 2011 IPPS/LTCH PPS final rule, 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 in this section II.D., we are required to implement the remaining adjustment in section 7(b)(1)(B) of Public Law 110–90 no later than the FY 2012 rulemaking period, and accordingly, in the FY 2011 IPPS/ LTCH PPS proposed rule, we proposed a recoupment adjustment under section 7(b)(1)(B) of ¥2.9 percent for FY 2011 (75 FR 23870 and 23871). Therefore, we stated that we believed it was 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 through 23870) for FY 2011. We note that, as a result, payments in FY 2011 (and in each future year until we implement the requisite adjustment) would 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 noted that payments in FY 2010 were also 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 estimated increased aggregate payments by approximately $4 billion in FY 2010. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25803 and 25804), we indicated that because further delay of this prospective adjustment will result in a continued accrual of unrecoverable overpayments, it was imperative that we proposed a prospective adjustment for FY 2012, while recognizing CMS’ continued desire to mitigate the effects of any significant downward adjustments to hospitals. Therefore, we proposed a ¥3.15 percent prospective adjustment to the standardized amount to partially eliminate the full effect of the documentation and coding changes on future payments. Due to the offsetting nature of the remaining recoupment PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 51491 adjustment under section 7(b)(1)(B) of Public Law 110–90 (described below in section II.D.6. of this preamble), and after considering other payment adjustments to FY 2012 rates proposed elsewhere within the proposed rule, we indicated that we believe the proposed ¥3.15 percent adjustment would allow for a significant reduction in potential unrecoverable overpayments, yet would maintain a comparable adjustment level between FY 2011 and FY 2012, reflecting the applicable percentage increase with a documentation and coding adjustment. We stated that we recognize that an additional adjustment of ¥0.75 (3.9 minus 3.15) percent would be required in future rule making to complete the necessary ¥3.9 adjustment to meet CMS’ statutory requirement under section 7(b)(1)(A) of Public Law 110–90. In the proposed rule, we indicated that we were not at that time proposing a timeline to implement the remainder of this prospective adjustment. 6. Recoupment or Repayment Adjustment for FY 2010 Authorized by Section 7(b)(1)(B) of Public Law 110–90 As discussed in section II.D.1. of this preamble, 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 2008 and 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 with comment period (74 FR 43773), we estimated 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, 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 in FY 2008. 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. In the FY 2010 IPPS/RY 2010 LTCH PPS E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51492 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 increase or decrease in FY 2009 payments in future rulemaking for FY 2011 and 2012 after we performed a retrospective evaluation of the FY 2009 claims data. In response to public 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 recover 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 expected to address this issue in the FY 2011 rulemaking. We refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767 through 43777) for a detailed description of our proposal, responses to comments, and finalized policy. As we indicated in the FY 2011 IPPS/ LTCH PPS 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 adjustments 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 (1.9 plus 3.9) percentage points. Our actuaries estimated that this 5.8 percentage point increase resulted in an increase in aggregate payments of approximately $6.9 billion. In the FY 2011 IPPS/LTCH PPS final rule, we noted that there may be a need to actuarially adjust the recoupment adjustment to accurately reflect accumulated interest. Therefore, we determined that an aggregate adjustment of ¥5.8 percent in FYs 2011 and 2012, subject to actuarial adjustment to reflect accumulated interest, would be 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 increase in aggregate payments (including interest) in FYs 2008 and VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 2009. In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23871), we stated that we intended 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. 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 that we have adopted in many similar cases, in the FY 2011 IPPS/LTCH PPS 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 would allow 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 (that is, no later than FY 2012). Unlike the permanent prospective adjustment to the standardized amounts under section 7(b)(1)(A) of Public Law 110–90 described earlier, the recoupment adjustment to the standardized amounts under section 7(b)(1)(B) of Public Law 110–90 is not cumulative, and, therefore, would be removed for subsequent fiscal years once we have completely offset the increase in aggregate payments for discharges for FY 2008 and FY 2009 expenditures. In keeping with our practice of moderating payment adjustments when necessary, we stated that we anticipated that the proposal of phasing in the recoupment adjustment 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. 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 received numerous comments on our proposal, especially from national and regional hospital associations, hospital systems, and individual hospitals. MedPAC also commented on our proposal. We refer readers to the FY 2011 IPPS/LTCH PPS final rule with comment period (75 FR 50055 through 50073) for a detailed description of our analysis and prior PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 responses to comments, and finalized policy. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 50068), we finalized the proposed adjustment to the standardized amount of ¥2.9 percent, which represented approximately half of the aggregate recoupment adjustment required under section 7(b)(1)(B) of Public Law 110–90, for FY 2011. We were persuaded by both the MedPAC’s analysis, and our own review of the methodologies recommended by various commenters, that the methodology we employed to determine the required recoupment adjustment was sound. Since the statute required that we implement the entire recoupment adjustment no later than FY 2012, 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. As we stated in prior rulemaking, a major advantage of making the ¥2.9 percent adjustment to the standardized amount in FY 2011 was that, because the required recoupment adjustment is not cumulative, we anticipated removing the FY 2011 ¥2.9 percent adjustment from the rates (in other words, making a positive 2.9 percent adjustment to the rates) in FY 2012, at the same time that the law required us 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 of these two steps would be an aggregate adjustment of approximately 0.0 percent. While we stated in the FY 2011 IPPS/LTCH PPS final rule the need to potentially adjust the remaining ¥2.9 percent estimate to account for accumulated interest, our actuaries have determined that there has been no significant interest accumulation and that no additional adjustment will be required. Therefore, for FY 2012, pursuant to the timeframes set forth by section 7(b)(1)(B) of Public Law 110–90, and consistent with the discussion in the FY 2011 IPPS/LTCH PPS final rule, we proposed to complete the recoupment adjustment by implementing the remaining ¥2.9 percent adjustment, in addition to removing the effect of the ¥2.9 percent adjustment to the standardized amount finalized for FY 2011. Because these adjustments will, in effect, balance out, there will be no year-to-year change in the standardized amount due to this recoupment adjustment. As this E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations adjustment will complete the required recoupment for overpayments due to documentation and coding effects on discharges occurring in FYs 2008 and 2009, we anticipate removing the effect of this adjustment by adding 2.9 percent to the standardized amount in FY 2013. We continue to believe that this is a reasonable and fair approach that satisfies the requirements of the statute while substantially moderating the financial impact on hospitals. Comment: One commenter, MedPAC, reiterated its general support for the methodology used by our actuaries to estimate the magnitude of documentation and coding effect on IPPS payments due to the adoption of the MS–DRG system. In its letter, MedPAC explained that the methodology used by our actuaries ‘‘is akin to comparing two sets of payments: What payments actually were in fiscal year 2009 under the 2009 MS–DRGs and relative weights; and what payments would have been in 2009 if MS–DRGs had not been adopted and CMS had continued to use the prior (2007) CMS DRGs and weights.’’ MedPAC noted that by taking the difference between these two sets of payments, the methodology is designed to capture ‘‘the new GROUPER’s interaction with how hospitals changed their documentation and coding. After the adoption of MS– DRGs in 2008, hospitals switched from recording general descriptions of patients’ chronic conditions—which no longer affect payments under MS– DRGs—to recording the specific acute manifestations of patients’ chronic conditions, which trigger higher payments under MS–DRGs. However, the same changes in diagnosis documentation and coding have little or no effect on the CMI measured using the 2007 CMS–DRGs and weights. This is because in that version of the GROUPER, both acute manifestations of chronic conditions and general descriptions of chronic conditions trigger higher payments. In contrast, when hospitals had little incentive to change documentation and coding—in 2007, for example—the two CMIs are approximately equal.’’ Consistent with its comments in prior years, MedPAC’s comment noted that its analysis of Medicare hospital inpatient claims for 2007–2009 yielded similar estimates of the documentation and coding effect. MedPAC concluded that ‘‘CMS would need to reduce IPPS payments temporarily by 5.8 percent to recover overpayments that occurred in 2008 and 2009. CMS also expected that overpayments equal to 3.9 percent of annual IPPS payments would continue through 2010, 2011, and future years VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 until CMS makes a prospective offsetting adjustment (¥3.9 percent) to the IPPS payments rates.’’ MedPAC’s comment described potential circumstances in which the methodology used both by our actuaries and MedPAC could overestimate the documentation and coding effect, noting that these possible circumstances ‘‘could cause only a small change in the estimated effect of documentation changes.’’ MedPAC stated, ‘‘In response to the new MS–DRGs, hospitals had an incentive to report diagnoses that count as CCs in the new system. MedPAC’s argument is that hospitals may also have stopped reporting diagnoses that counted as CCs in the old system, but do not count in the new one.’’ In short, MedPAC argued that the disappearance of the general chronic condition codes could have caused the CMIs based on the old FY 2007 GROUPER and weights to be understated in FYs 2008 and 2009. Thus, because CMIs based on the 2007 GROUPER and weights are the denominators of the documentation change estimates, understatement would bias the estimates upward. However, understatement would occur only to the extent that hospitals, when coding: (1) Did not replace such general chronic condition codes with corresponding acute manifestation codes and (2) the patient had no other secondary diagnosis code that qualified as a CC in the old GROUPER and are now CCs or MCCs under the MS–DRGs. MedPAC’s analysis concluded that the maximum possible effect of this potential overestimation is 0.36 percent, and ‘‘that total overpayments due to documentation changes in 2008 and 2009 may have ranged from 5.1 to 5.8 percent of IPPS payments ($6.0 to $6.9 billion).’’ MedPAC recommended that CMS slow the pace of the payment adjustments so that hospitals would receive a net 1 percent update in FY 2012, as it recommend in its March 2011 Report to Congress. Furthermore, MedPAC stated that legislation should be enacted to require the Secretary of Health and Human Services to adjust payments further to recover all overpayments that have occurred or will occur in FYs 2010, 2011, and 2012 because the prospective adjustment was not completed. MedPAC asserted that: ‘‘To allow payments to increase due to documentation and coding changes would undermine Congressional policy on updates. If Congress wants more money to flow into the hospital sector, a higher update is the appropriate mechanism, not cumulative changes in documentation and coding. Indeed, PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 51493 allowing those changes to increase hospital payments through the back door could eventually discourage needed refinements to the case-mix system in a tight budget era. In other words, if more money inevitably leaks into the system every time case-mix is refined, then there may be pressure to stop refining. That would lead to inequities for both providers and patients.’’ Response: We appreciate MedPAC’s analysis and continued support of the methodology used to determine the documentation and coding effect, and we agree that this methodology appropriately isolates the documentation and coding effect from real case-mix. With the exception of the possible overstatement described above, we note that MedPAC’s analysis yielded results similar to CMS’ determination of the documentation and coding effect. Based on our evaluation of FY 2008 and FY 2009 claims, we continue to believe that $6.9 billion dollars in overpayments were made during the period of FY 2008 and 2009. We estimate that a recoupment adjustment totaling 5.8 percent is necessary to recover these overpayments, and that operating IPPS rates are currently overstated by 3.9 percent. We also note that section 7(b)(1)(B) of the TMA requires the agency to recover these overpayments by FY 2012 and that section 7(b)(1)(A) of the TMA requires the agency to adjust rates to ensure that aggregate payments do not continue to be overstated. With regard to MedPAC’s analysis regarding the possible overestimate of the documentation and coding effect, we note that MedPAC characterized the potential effect as ‘‘small’’ and provided no corroborating analysis or specific examples of when this scenario may have occurred. We consulted with our medical coding experts and were unable to identify specific examples to support MedPAC’s hypothesis. We note that MedPAC stated in its comment letter that the potential for overestimation exists only to the extent that ‘‘hospitals (1) did not replace such general chronic condition codes with corresponding acute manifestation codes and (2) the patient had no other secondary diagnosis code that qualified as a CC in the old grouper.’’ We reviewed coding changes that occurred during the transition to MS–DRGs and were able to identify codes that would result in a CC prior to MS–DRGs but would not result in a CC in the MS–DRG system. However, we were unable to identify an instance where this would necessarily result in a lower MS–DRG assignment because more specific codes were E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51494 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations developed to support the more refined MS–DRG system and we would expect hospitals to use the more specific codes. For instance, congestive heart failure was a CC under CMS DRGs, but is not a CC under MS–DRGs. Under MS– DRGs, we started requiring more specific information on the type of heart failure in order to count this as a CC or MCC. Generally, under the MS–DRG system, the ‘‘unspecified’’ codes in a category no longer result in CCs. We did not receive any other public comments regarding MedPAC’s statements that we may have overestimated the effect of the documentation and coding by considering cases grouped under the MS–DRG system as having a higher severity due to being coded without appropriate CCs under the pre-MS–DRG system. At this time, we believe it would not be appropriate to revise our estimates based solely on MedPAC’s analysis without knowing of any specific examples of the scenario described above. Without this information, we cannot determine whether there was a sufficient volume of cases to cause a potential documentation and coding overestimate. However, we welcome specific examples from the public to possibly inform future rulemaking. We acknowledge MedPAC’s recommendation to provide hospitals with a net 1 percent update. As noted above, the comment restates MedPAC’s recommendation from its March 2011 Report to Congress. We address this issue below in our response to comments by the provider community that expressed concern regarding the impact of various payment adjustments on hospitals. We also acknowledge MedPAC’s request that additional statutory authority be granted to the Secretary of Health and Human Services to recover overpayments made during subsequent fiscal years. Lastly, we agree with MedPAC that it is important to continue refining the methodology of how case mix is measured to ensure payment accuracy. We note that in this final rule we discuss potential refinements to the MS–DRG relative weight system, and CMS’ active engagement in implementing the ICD–10 system. These discussions illustrate the efforts the agency is undertaking to improve the ability to measure case mix precisely and to pay hospitals for inpatient services more accurately. Comment: Most commenters, including national hospital associations, continued to acknowledge that there were documentation and coding VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 increases in FY 2008 and FY 2009 that were in excess of the statutory 0.6 percent and 0.9 percent adjustments specified in section 7(a) of the TMA. However, as in prior rulemakings on this issue, most commenters again questioned the methodology employed by MedPAC and our actuaries to determine the magnitude of the excess. We also received Congressional correspondence from numerous members of Congress stating that hospitals had expressed concerns regarding the CMS Actuary’s methodology and requesting that CMS ensure that its methodology accurately reflects changes in patient severity prior to finalizing adjustments for documentation and coding in response to hospitals’ concerns. Specifically, the correspondence suggested that CMS could consider alternative methodologies for estimating the effect of documentation and coding, including trend-based analysis and chart abstraction. Several commenters stated that historical case mix trend is inconsistent with our estimate of the effect of the FY 2008 and FY 2009 documentation and coding changes due to the implementation of the MS–DRGs. One commenter stated ‘‘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 cumulative documentation and coding effect of 3.6 percent for FYs 2008 and 2009, as opposed to the 5.4 percent that CMS found.’’ Several commenters submitted an historical case-mix trend analysis last year, which showed a documentation and coding effect of 2.3 percent. An analysis submitted by the same commenters this year showed a cumulative documentation and coding increase through FY 2009 of 3.6 percent. The commenters revised their analysis to respond to CMS comments made in last year’s rule. Specifically, the national hospital associations stated that, ‘‘This year we make several modifications to that trend-based analysis to respond to CMS’ critiques as enumerated in the FY 2011 inpatient PPS final rule. Given that we have addressed the agency’s concerns, we are hopeful that it will give our methodology fresh consideration.’’ One hospital association also pointed out that CMS included an assumption regarding real case-mix growth in the adjustment for ‘‘changes in case-mix’’ in the capital update framework at PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 § 412.308(c)(1)(ii) and suggested that the estimate made by our actuaries regarding documentation and coding be reduced by this assumption in order to maintain consistency with the capital update framework. Commenters also examined the methodology used by our actuaries and MedPAC using index number theory. As stated by these commenters, ‘‘the relative case weights in a given grouper are like relative prices in a price index calculation (in fact they are relative prices for the different MS–DRGs) and the quantities of discharges in various MS–DRGs are like the quantities of goods in the price index calculation.’’ Commenters claimed that, based on index number theory, the methodology employed by MedPAC and our actuaries can only provide upper and lower bounds of the combined effect of documentation and coding and real case-mix change. MedPAC, however, indicated that knowledge of the 2007 MS–DRG GROUPER, the new MS–DRG GROUPER, historical documentation of patients’ diagnoses, and the changes CMS made when it created the MS– DRGs can be used to narrow the range of the potential documentation and coding effect as described above, although they noted that these ‘‘could cause only a small change in the estimated effect of documentation changes.’’ As in past years, several commenters indicated that CMS should use medical records data to distinguish documentation and coding changes from real case-mix changes. MedPAC disagreed with the commenters’ rationale that the use of medical records data could determine the effect of both documentation and coding, and stated the following: ‘‘Gold-standard coders, however, only see the diagnoses written in the record and therefore are not able to distinguish changes in documentation from real changes in patients’ diagnoses. This method of recoding existing documentation only works in situations where hospitals have no incentive to change documentation. That is clearly not the case with the transition to MS–DRGs.’’ Response: We disagree that the new analysis presented by the national hospital associations has addressed our concerns with the use of a trend analysis to determine the documentation and coding increase when a more direct measurement of the relevant increase can be obtained using our proposed methodology. In last year’s rule, we expressed several concerns with regard to the use of a trend analysis, stating, ‘‘We believe that the determination of an appropriate E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 51495 comment letter which supported CMS’ position. MedPAC’s analysis demonstrated that CMI growth was modest at best, never exceeding plus or minus 1 percent the decade prior to the introduction of MS–DRGs, and in some years was negative. 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 the MedPAC, if an appropriate historical trend can be determined.’’ We reiterate our concerns with the use of historical trends to determine documentation and coding this year, and we do not believe that the modifications to the commenters’ analysis address all of these concerns. In particular, we agree with MedPAC that ‘‘absent changes in documentation and coding and the shift away from inpatient surgeries, real changes in the CMI in 2008 through 2010 would be completely consistent with historical CMI changes since 2001.’’ In performing its analysis, MedPAC adjusted for changes in the share of cases with surgery, share of cases with CCs, and the estimated effects of changes in documentation and coding. MedPAC summarized the results of its analysis in the following graph. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.000</GPH> 50065 through 50066)), we did not state the correction of those flaws would yield a better documentation and coding estimate than the direct estimate obtained under our proposed methodology. In fact, we noted that ‘‘changes in case-mix do not necessarily follow a consistent pattern over time.’’ MedPAC provided analysis in its The national hospital associations’ most significant response to our critique of their previous analysis in the FY 2011 IPPS/LTCH PPS final rule was to expand the time period upon which its trend analysis is based to include years where there were sustained negative changes in actual CMI. This raised their estimate of documentation and coding from 2.3 percent to 3.6 percent. We believe that this increase demonstrates the variability in the estimates that can be obtained using trend analyses. We also stated in last year’s final rule that ‘‘despite our position that our methodology more directly measures the relevant increase, we did examine mstockstill on DSK4VPTVN1PROD with RULES2 historical trend is less straightforward than our methodology, which, as described above, simply removes real case-mix growth from the calculation’’ (75 FR 50066). While we pointed out certain analytical flaws in the trend analysis used last year (for a full discussion, we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations In summary, with respect to trend analysis, we continue to believe that the determination of an appropriate historical trend is less straightforward than our proposed methodology, which simply removes real case-mix growth from the calculation. In addition, the estimates obtained using our proposed methodology are consistent with the historical case-mix growth, as demonstrated by MedPAC. We also disagree with commenters who stated that the methodology employed by MedPAC and our actuaries can only provide upper and lower bounds of the combined effect of documentation and coding and real case-mix change and cannot separate documentation and coding effects from real case-mix change. While MedPAC recognized that the potential for a range of estimates may exist, MedPAC disagreed with the conclusion that index number theory, as described above, should be used to determine this range. MedPAC stated that ‘‘in this instance at least, the estimated range between the lower and upper bounds based on this approach is so wide that the estimates are useless for policy making.’’ We agree with MedPAC that the wide range resulting from an index number theory approach renders such an approach useless in this context. In response to commenters’ support for using hospital records to distinguish documentation and coding effect from real case-mix changes, we agree with VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 MedPAC’s rationale that such an analysis would fail to capture changes in documentation. MedPAC stated: ‘‘In our view, this approach does not work. The reason is that hospitals had an incentive to persuade attending physicians to be more specific in describing patients’ acute manifestations of chronic conditions in their medical records. Some hospitals hired documentation specialists with the goal of changing physicians’ medical record documentation, not simply to do a better job of coding what they wrote in the record (Hahey 2008). Goldstandard coders, however, only see the diagnoses written in the record and therefore are not able to distinguish changes in documentation from real changes in patients’ diagnoses. This method of recoding existing documentation only works in situations where hospitals have no incentive to change documentation. That is clearly not the case with the transition to MS– DRGs. Thus, a very important part of the effect of changes in documentation and coding cannot be detected by the proposed method.’’ We also note that as one part of our initial documentation and coding analysis, we attempted to examine coding changes based on hospital chart data from the Medicare Clinical Data Abstraction Center (CDAC). However, as we described in the FY 2010 IPPS/LTCH PPS final rule, it was not possible to perform this analysis due to aberrant PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 CDAC data. We stated, ‘‘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–FY 2007 analysis period. It was not possible to distinguish changes in documentation and coding from changes in real casemix in the CDAC data. Therefore, we concluded that the CDAC data would not support analysis of real case-mix growth that could be used in our retrospective evaluation of the FY 2008 claims data.’’ (74 FR 43769) Finally, we disagree with the commenters’ suggestion that the assumptions in the capital update framework should be applied in our actuaries’ estimate of documentation and coding, because the capital update framework is intended for projection purposes and would be inappropriate to use as a proxy for historical trends. After careful consideration of all of the public comments we received, including alternatives suggested by commenters, we remain confident in the accuracy of our methodology and its appropriateness in determining the required adjustment amounts. Comment: Numerous commenters expressed concern regarding the potentially severe negative fiscal impact that would be experienced by providers if the proposed documentation and coding improvement adjustment were to E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.001</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51496 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations be implemented. As noted above, MedPAC recommended that CMS reduce its proposed ¥3.15 percent adjustment to be consistent with a net update factor of +1.0 percent, as it recommended in its March 2011 Report to Congress. As noted previously, we also received Congressional correspondence from numerous members of Congress that requested CMS to reconsider what would be an appropriate adjustment to hospital payments and also requested that CMS reexamine its methodology. This correspondence noted that hospitals would experience payment reductions if the proposed rule were finalized without modification and further stated that hospitals needed ‘‘adequate Medicare reimbursement to ensure that patients and communities receive the care they need.’’ Response: We recognize the concerns regarding possible financial disruption that may be caused by the proposed documentation and coding improvement payment adjustment. We note, however, that these payment adjustments are necessary to correct past overpayments due solely to documentation and coding improvements. We have already delayed implementation of the required prospective adjustment amount, and we proposed only a portion of the remaining required adjustment to allow hospitals time to adjust to future payment differences and to moderate the effect of this adjustment in any given year. We are required under section 7(b)(1)(B) of the TMA to complete the remaining one-time ¥2.9 percent recoupment adjustment for FY 2008 and FY 2009 overpayments in FY 2012, and we believe the impact of completing this adjustment to be reasonable considering it will be completely offset by removing the FY 2011 recoupment adjustment by placing a +2.9 percent adjustment back to the standardized amount. In FY 2013, a positive +2.9 percent adjustment will be made, completing the recoupment process. In the proposed rule, we stated it was imperative that CMS make a significant prospective adjustment amount in FY 2012 to prevent the accumulation of unrecoverable overpayments. As stated in previous responses to comments, we remain confident in the accuracy of the overall methodology and its appropriateness in determining the required adjustment amount. However, after consideration of the public comments, and in keeping with our longstanding policy to mitigate, when possible, the effects of significant downward adjustments on hospitals, we are finalizing a prospective adjustment of ¥2.0 percent, which is a reduction from our proposed adjustment of ¥3.15 percent. We note that this adjustment will result in a total update of +1.0 percent, in accordance with MedPAC’s recommendation in its March 2011 Report to Congress for hospitals that report quality data consistent with the requirements of the Hospital IQR Program. Specifically, as discussed elsewhere in this final rule, the applicable percentage increase for FY 51497 2012 is +1.9 percent (based on a market basket of +3.0 percent, a multifactor productivity adjustment of ¥1.0 percentage point, and a statutory adjustment of ¥0.1 percentage point in accordance with section 3401 of the Affordable Care Act). When combined with the +1.1 adjustment in light of Cape Cod v. Sebelius, 630 F.3d 203 (D.C. Cir. 2011) discussed elsewhere in this final rule, the applicable percentage increase of +1.9 percent and this proposed prospective adjustment of ¥2.0 percent results in a net total update of +1.0 percent, prior to additional adjustments for budget neutrality and other policy adjustments. We believe that this level of adjustment will help to minimize year to year volatility in payment rates due to the required documentation and coding adjustment. As we stated in the proposed rule, our analysis found that a prospective adjustment of ¥3.9 percent continues to be necessary. Because we are making a ¥2.0 percent prospective adjustment for FY 2012, a remaining prospective of adjustment of ¥1.9 percent will be necessary. While we are not at this time stating when we will make the remaining required ¥1.9 percent prospective adjustment, we consider it feasible to make all or most of the adjustment in FY 2013, when a +2.9 percent adjustment will be factored into rates to offset the one-time FY 2012 recoupment adjustment. The table below summarizes the adjustments for FY 2012 for documentation and coding for IPPS hospitals. FY 2012 MS–DRG DOCUMENTATION AND CODING ADJUSTMENT Required prospective adjustment for FYs 2008– 2009 Remaining required recoupment adjustment for FYs 2008– 2009 Total remaining adjustment Prospective adjustment for FY 2012 Recoupment adjustment to FY 2012 payments Remaining prospective adjustment ¥3.9% ¥2.9% ¥6.8% ¥2.0% ¥2.9% ¥1.9% Level of Adjustments ............................... mstockstill on DSK4VPTVN1PROD with RULES2 7. Background on the Application of the Documentation and Coding Adjustment to the Hospital-Specific Rates Under section 1886(d)(5)(D)(i) of the Act, SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal rate; the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospital-specific rate based on FY 2006 costs per discharge. Under VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 section 1886(d)(5)(G) of the Act, MDHs are paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the updated hospital-specific rate based on the greatest of the FY 1982, FY 1987, or FY 2002 costs per discharge. In the FY 2008 IPPS final rule with comment period (72 FR 47152 through 47188), we established a policy of applying the documentation and coding adjustment to the hospital-specific rates. In that final rule with comment period, we indicated that because SCHs and MDHs PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 use the same DRG system as all other hospitals, we believe they should be equally subject to the budget neutrality adjustment that we are applying for adoption of the MS–DRGs to all other hospitals. In establishing this policy, we relied on section 1886(d)(3)(A)(vi) of the Act, which provides us with the 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51498 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations rescinded the application of the documentation and coding adjustment to the hospital-specific rates retroactive to October 1, 2007. In that final rule, we indicated that, while we still believe it would be appropriate to apply the documentation and coding adjustment to the hospital-specific rates, upon further review, we decided that the application of the documentation and coding adjustment to the hospitalspecific rates is not consistent with the plain meaning of section 1886(d)(3)(A)(vi) of the Act, which only mentions adjusting ‘‘the standardized amount’’ under section 1886(d) of the Act and does not mention adjusting the hospital-specific rates. In the FY 2009 IPPS proposed rule (73 FR 23540), we indicated that we continued to have concerns about this issue. Because hospitals paid based on the hospital-specific rate use the same MS–DRG system as other hospitals, we believe they have the potential to realize increased payments from documentation and coding changes that do not reflect real increases in patient 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 rule that we would consider whether such a proposal was 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 was warranted, we indicated that we would propose to make such an adjustment in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule. 8. Documentation and Coding Adjustment to the Hospital-Specific Rates for FY 2011 and Subsequent Fiscal Years In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule and final rule (74 FR 24098 through 24100 and 74 FR 43775 through 43776, respectively), we discussed our 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 for other IPPS hospitals, but did not significantly differ from that result. We refer readers to those rules for a more complete discussion. 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 PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 adjustment to the national standardized amount under section 7(b)(1)(A) of Public Law 110–90 because, unlike the national standardized rates, the FY 2008 hospital-specific rates were not previously reduced in order to account for anticipated changes in documentation and coding that do not reflect real changes in case-mix resulting from the adoption of the MS– DRGs. In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24100), we solicited public comment on this proposal. 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. We refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule for a more detailed discussion of our proposal, responses to comments, and finalized policy. As we have noted previously, because SCHs and MDHs use the same MS–DRG system as all other IPPS 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 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 different types of providers. As we discuss in section II.D.4. of this preamble, 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 to SCHs and MDHs. Unlike the case of standardized amounts paid to IPPS hospitals, prior to FY 2011, we had 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 recoupment adjustment needed to be made, as opposed to a ¥3.9 percent remaining adjustment for IPPS hospitals. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50068 through 50071), we made an adjustment to the standardized E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations amount for IPPS hospitals of ¥2.9 percent under section 7(b)(1)(B) of Public Law 110–90, for FY 2011. As we noted in the FY 2011 IPPS/LTCH PPS final rule, 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. Therefore, we finalized a prospective adjustment of ¥2.9 percent to the hospital-specific rates paid to SCHs and MDHs. We refer readers to the FY 2011 IPPS/LTCH PPS final rule for a more detailed discussion of our proposal, responses to comments, and finalized policy. As discussed earlier in this section II.D., in the FY 2012 IPPS/LTCH PPS proposed rule, we proposed a net ¥3.15 percent documentation and coding adjustment for IPPS hospitals in FY 2012 (¥3.15 percent prospective adjustment plus a ¥2.9 percent recoupment adjustment in FY 2012, offset by the removal of the ¥2.9 percent recoupment adjustment for FY 2010). The proposed IPPS adjustment exceeded the remaining ¥2.5 percent documentation and coding adjustment for hospitals receiving a hospitalspecific rate (that is, the entire ¥5.4 percent adjustment, minus the ¥2.9 percent adjustment finalized for FY 2011). As we indicated in the FY 2011 IPPS/LTCH PPS proposed rule and final rule, we are continuing, as much as possible, consistent with section 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. We believe that any adjustment to the hospital-specific rate due to documentation and coding effect should be as similar as possible to adjustments to the IPPS rate. Accordingly, we proposed a ¥2.5 percent payment adjustment to the hospital-specific rate. We believe that proposing the entire remaining prospective adjustment of ¥2.5 percent would allow CMS to maintain, to the extent possible, similarity and consistency in payment rates for different IPPS hospitals paid using the MS–DRG. As discussed below, we took a similar approach in finalizing an adjustment to the Puerto-Rico specific rate in FY 2011. Comment: Numerous commenters requested that CMS rescind its proposed documentation and coding adjustment for SCHs and MDHs and questioned CMS’ statutory authority to apply this adjustment to providers receiving a hospital-specific rate. The commenters VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 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 IPPS final rule (73 FR 48448), and the FY 2010 IPPS/ RY 2010 LTCH PPS 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 hospitals have the same financial incentives for documentation and coding improvements and the same ability to benefit from the resulting change in case-mix, and by recommending 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 PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 51499 multi-year 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 appreciate MedPAC’s comments and agree that it is appropriate to conclude that hospitals paid under the hospital-specific rate have experienced a 5.4-percent increase documentation and coding in FYs 2008 and 2009, insofar as these hospitals had the same financial incentives to improve documentation and coding in those years as other IPPS hospitals. We further agree with MedPAC that it is appropriate to focus on minimizing the accumulation of overpayments, and we interpret this to mean that MedPAC recommends that CMS move forward as quickly as possible with prospective adjustments at an appropriate level. We appreciate MedPAC’s guidance that ‘‘all hospitals be treated the same,’’ and stress the importance of consistent treatment of various classes of similarly situated hospitals in our payment policy determinations. We continue to believe that any adjustment to the hospital-specific rate due to documentation and coding effect should be as similar as possible to adjustments to the standardized amount. Accordingly, because we are finalizing a prospective adjustment to the standardized amount of ¥2.0 percent for FY 2012, we are also finalizing a prospective adjustment to the hospital-specific rate of ¥2.0 percent for FY 2012, instead of our proposed adjustment of ¥2.5 percent. Making this level of adjustment allows CMS to maintain, for FY 2012, consistency in payment rates for different IPPS hospitals paid using the MS–DRG. Because this ¥2.0 percent adjustment no longer reflects the entire remaining requirement adjustment amount of ¥2.5 percent, an additional ¥0.5 percent adjustment to the hospital-specific payment rates will be required in future rulemaking. 9. 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51500 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 (that is, we made a positive 0.6 percent adjustment, increasing the 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 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 to apply documentation and coding adjustments to the FY 2010 Puerto Ricospecific standardized amount under our authority in section 1886(d)(5)(I)(i) of the Act. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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. However, as we noted 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 was more or less than our then current estimates, it would change, possibly lessen, the anticipated cumulative adjustments that we had estimated 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. 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 and solicited public comment on the proposed ¥1.1 percent prospective adjustment. However, in parallel to our decision to postpone adjustments to the Federal standardized amount, we also indicated that we were adopting a similar policy for the Puerto Ricospecific rate for FY 2010 and would consider the phase-in of this adjustment over an appropriate time period through future rulemaking. We noted that, as with the hospital-specific rates, the Puerto Rico-specific standardized amount had not previously been adjusted based on estimated changes in documentation and coding associated with the adoption of the MS–DRGs. 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 PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 in case-mix for discharges occurring during FY 2009. 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. As discussed in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50071 through 50073), using the same methodology we applied to estimate documentation and coding changes under IPPS for non-Puerto Rico hospitals, our best estimate, based on the then most recently available data (FY 2009 claims paid through March 2010), was that, for documentation and coding that occurred over FY 2008 and FY 2009, a cumulative adjustment of ¥2.6 percent was required to eliminate the full effect of the documentation and coding changes on future payments from the Puerto Rico-specific rate. 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 to eliminate the full effect of the documentation and coding changes on the portion of future payments to Puerto Rico hospitals based on the Puerto Ricospecific rate. We stated that we believed that a full prospective adjustment was the most appropriate means to take into full account the effect of documentation and coding changes on payments, while maintaining equity as much as possible between hospitals paid on the basis of different prospective rates. We noted that our updated data analysis in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50072 through 50073) showed that this adjustment would be ¥2.6 percent. The previous estimate in the proposed rule was a ¥2.4 percent adjustment. One reason we proposed the full prospective adjustment for the Puerto Rico-specific rate in FY 2011 was to E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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. E. Refinement of the MS–DRG Relative Weight Calculation mstockstill on DSK4VPTVN1PROD with RULES2 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 did not anticipate proposing any additional adjustments to this rate for documentation and coding effects. Therefore, because the Puerto Ricospecific rate received a full prospective adjustment of ¥2.6 percent in FY 2011, we proposed no further adjustment in the proposed rule for FY 2012. 2. 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 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 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 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 51501 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 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 E:\FR\FM\18AUR2.SGM 18AUR2 51502 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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). 3. Summary of Policy Changes Made in FY 2011 In the FY 2009 IPPS/LTCH PPS 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 refer readers to the Web site: https://www.rand.org/pubs/ working_papers/WR560/, and the FY 2009 IPPS/LTCH PPS final rule for details on the RAND report (73 FR 48453 through 48457).) 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 FY 2009 IPPS/LTCH PPS 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. 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 has been available for use for cost reporting periods beginning on or after May 1, 2009. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create standard cost centers for CT scans, MRI, 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/LTCH PPS and CY 2009 OPPS/ASC proposed VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 and final rules, RTI found that the costs and charges of CT scans, MRI, 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 scans, MRI, 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. (We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion on the reasons for the creation of standard cost centers for CT scans, MRI, and cardiac catheterization.) The new standard cost centers for MRI, CT scans, and cardiac catheterization are effective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS–2552–10. CMS issued the new hospital cost report Form CMS– 2552–10 on December 30, 2010. The new cost report form can be accessed at the CMS Web site at: https:// www.cms.gov/Manuals/PBM/ itemdetail.asp?filterType=none& filterByDID=-99& sortByDID=1&sortOrder=ascending& itemID=CMS021935&intNumPerPage =10. Once at this Web site, users should double click on ‘‘Chapter 40.’’ 4. Discussion for FY 2012 In the FY 2009 IPPS/LTCH PPS final rule (73 FR 48468), we stated that, due to what is typically a 3-year lag between the reporting of cost report data and the availability for use in ratesetting, we anticipated that we might be able to use data from the new ‘‘Implantable Devices Charged to Patients’’ cost center to develop a CCR for Implantable Devices Charged to Patients in the FY 2012 or FY 2013 IPPS rulemaking cycle. Specifically, we stated, ‘‘Because there is approximately a 3-year lag between the availability of cost report data for IPPS and OPPS rate-setting purposes in a given fiscal year, we may be able to derive two distinct CCRs, one for medical supplies and one for devices, for use in calculating the FY 2012 or FY 2013 IPPS relative weights and the CY 2012 or CY 2013 OPPS relative weights’’ (73 FR 48468). However, as noted in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43782), due to delays in the issuance of the revised cost report CMS 2552–10, a new CCR for Implantable Devices Charged to Patients may not be available until FY 2013. Similarly, when we finalized the decision in the FY 2011 PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 IPPS/LTCH PPS final rule to add new cost centers for MRI, CT scans, and cardiac catheterization, we explained that data from any new cost centers that may be created will not be available until at least 3 years after they are first used (75 FR 50077). That is, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50077), we stated that the data from the standard cost centers for MRI, CT scans, and cardiac catheterization respectively, 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 further 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. We also reassured public commenters that there was no need for immediate concern regarding possible negative payment impacts on MRI and CT scans under the IPPS and the OPPS because the cost report data that would be used for the calculation of the relative weights were at least 3 years from being available. We stated that we will first thoroughly analyze and run impacts on the data and provide the public with the opportunity to comment before distinct CCRs for MRI and CT scans would be finalized for use in the calculation of the relative weights. We also urged 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 (75 FR 50077). Accordingly, in preparation for the FY 2012 IPPS/LTCH PPS proposed rule, we assessed the availability of data in the ‘‘Implantable Devices Charged to Patients’’ cost center. In order to develop a robust analysis regarding the use of cost data from the ‘‘Implantable Devices Charged to Patients’’ cost center, it was necessary to have a critical mass of cost reports filed with data in this cost center. The cost center for ‘‘Implantable Devices Charged to Patients’’ is effective for cost reporting periods beginning on or after May 1, 2009. While developing the FY 2012 IPPS/LTCH PPS proposed rule, we checked the availability of FY 2009 cost reports in the December 31, 2010 quarter ending update of HCRIS, which was the latest upload of FY 2009 cost report data that we could use for the proposed rule. We determined that there were only 437 hospitals (out of approximately 3,500 IPPS hospitals) E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations that completed the ‘‘Implantable Devices Charged to Patients’’ cost center. We did not believe that this was a sufficient amount of data from which to generate a meaningful analysis in this particular situation. Therefore, we did not propose to use data from the ‘‘Implantable Devices Charged to Patients’’ cost center to create a distinct CCR for Implantable Devices Charged to Patients for use in calculating the MS– DRG relative weights for FY 2012. We indicated that we would reassess the availability of data for the ‘‘Implantable Devices Charged to Patients’’ cost center, and the ‘‘MRI, CT Scans, and Cardiac Catheterization’’ cost centers, for the FY 2013 IPPS rulemaking cycle and, if appropriate, we would propose to create a distinct CCR at that time. Comment: Commenters requested that CMS reconsider its position to not use the data from the implantable device cost center to calculate the MS–DRG relative weights for FY 2012. The commenter noted that during the development of the proposed rule, CMS found that only 437 hospitals out of approximately 3,500 IPPS hospitals reported data in the ‘‘Implantable Devices Charged to Patients’’ cost center of the Medicare hospital cost report based on the December 2010 update of FY 2009 HCRIS. One commenter found, while reviewing the March 2011 update of FY 2009 HCRIS, that there are approximately 800 hospitals that are reporting cost information in the implantable medical device cost center. Another commenter stated that, based on the December 2010 update of FY 2009 HCRIS, 804 hospitals reported data on either line 55 (Medical Supplies Charged to Patients) or line 55.30 (Implantable Devices Charged to Patients), and in the March 2011 update of FY 2009 HCRIS, approximately 1,600 hospitals were reporting data on either of those lines. As such, the commenters believed there is now a sufficient amount of data to use the implantable device CCR to calculate the relative weights and improve accuracy of the payment rates. Commenters also noted that if we do not use the implantable device cost center to calculate the FY 2012 relative weights, there will be enough data to develop an implantable device CCR for FY 2013. One commenter suggested that CMS adopt regression-based CCRs to calculate the FY 2012 MS–DRG relative weights because CMS does not yet have sufficient cost report data to develop the implantable device CCR. This would allow CMS to address charge compression immediately and improve payment accuracy for medical devices and implantables. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Response: In the FY 2012 IPPS/LTCH PPS proposed rule, we indicated that we did not have sufficient cost report data to develop the kind of robust analysis that we assured the public we would provide prior to implementing a new CCR for implantable medical devices. Therefore, we stated that we will reassess the availability of data for FY 2013. We have reviewed the availability of FY 2009 cost reports in the March 31, 2011 quarter ending update of HCRIS, which is the latest upload of FY 2009 cost report data that we currently have available. We have determined that, for cost reporting periods beginning on or after May 1, 2009, the effective date of line 55.30 (Implantable Devices Charged to Patients), there are 961 hospitals (out of approximately 3,500 IPPS hospitals) that have completed the ‘‘Implantable Devices Charged to Patients’’ cost center. This represents an increase of 524 compared to the 437 entries that we found when developing the FY 2012 proposed rule. Regardless of the number of hospitals currently reporting data in the ‘‘Implantable Devices Charged to Patients’’ cost center, the data that were available at the time we were developing our proposed policies for FY 2012 were insufficient, and we believe it would be inappropriate to finalize a specific CCR for implantable devices charged to patients for FY 2012 without an opportunity for the public to review and comment on our analysis. Rather, we believe that it is appropriate to wait until FY 2013, when we hope to be able to provide a proper impact analysis of the addition of a CCR for implantable devices charged to patients in the relative weights calculation. Accordingly, we are not implementing a regression-based CCR for implantable devices at this time. Therefore, we are not implementing any new CCRs for use in the relative weights calculation for FY 2012. Comment: Commenters urged CMS to increase education efforts to encourage faster hospital adoption of the use of the implantable medical device cost center. Commenters noted that, at the time of the development of the FY 2012 IPPS/ LTCH PPS proposed rule, only 437 hospitals had completed the implantable device cost center, and this demonstrated that CMS needs to undertake additional outreach to hospitals to ensure that they appropriately complete the Medicare hospital cost report. Response: We agree that it is important that hospitals understand how to accurately report data in the ‘‘Implantable Devices Charged to Patients’’ cost center, and we have worked to add more clarity to the cost PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 51503 report instructions. However, we do believe that the December 31, 2010 update of HCRIS reflected relatively few entries for this cost center because the corresponding cost center line was only available for use for cost reporting periods beginning on or after May 1, 2009. This effective date was somewhat awkward in terms of timing and would not have applied to a large number of hospitals whose data would not be evident to CMS until the March 31, 2011 update to HCRIS. Comment: Commenters suggested that CMS monitor the accuracy of the data reported in the implantable device cost center on the Medicare hospital cost report. Commenters urged CMS to impress the importance upon the Medicare Administrative Contractors (MACs) of establishing a mechanism to audit the implantable device cost center to ensure that the costs and charges are appropriately reported. One commenter suggested that CMS require MACs to require hospitals to explain why they had not reported in the implantable device cost center. In addition, the commenters suggested that CMS reissue instructions, similar to Transmittal 321, dated February 28, 2009, to the MACs with recommendations that MACs develop an audit program for line 55 (Medical Supplies Charged to Patients) and line 55.30 (Implantable Devices Charged to Patients). Commenters noted that potential audit mechanisms include identifying the presence of revenue codes 274, 275, 276 and 624 reported on the PS&R used to settle the cost report, and comparing the CCR based on line 55.30 to the CCR based on line 55. In addition, one commenter suggested that the cost reporting software be modified to create a level 1 error in the case where no data is reported on line 55.30 (Implantable Devices Charged to Patients) to compel hospitals to report that information. Response: We agree with the commenters that the cost reporting lines, whether they are for Implantable Devices Charged to Patients, MRI, CT scans, cardiac catheterization, or any others, should be subject to greater audit scrutiny from the Medicare contractors. The new Medicare cost report form CMS–2552–10, on line 121 of Worksheet S–2, Part I, asks ‘‘Did this facility incur and report costs for implantable devices charged to a patient? Enter in column 1 ‘‘Y’’ for yes or ‘‘N’’ for no.’’ All hospital types, including non-IPPS hospitals, CAHs, and Maryland inpatient short-term acute hospitals, are required to properly report their costs and charges, and if the answer to this question is Y for any type of hospital, then line 72, column 26, of E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51504 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Worksheet B, Part I must be greater than 0, with an accurate amount that reflects the hospital’s costs for implantable devices charged to patients. In addition, we note that a Level 1 edit on the CMS– 2552–10 form already exists that ensures that line 72, column 26, of Worksheet B, Part I (Implantable Devices Charged to Patients on Worksheet A of the CMS–2552–10 form) is greater than 0 if Worksheet S–2, Part I, line 121 is ‘‘Y’’. The edit is also set up for the reverse scenario; that is, if there is an amount on Worksheet B, Part I, line 72, column 26, then the response on Worksheet S–2, Part I, line 121 must be ‘‘Y.’’ Comment: Some commenters supported not making major refinements to the calculation of MS– DRG relative weights. Commenters valued the consistency, transparency, and predictability of the calculation of the MS–DRG relative weights. Response: We appreciate the commenters’ support for our proposal of not making major refinements to the MS–DRG relative weights in the absence of sufficient data from which to create new CCRs. We also value consistency, transparency, and predictability in the calculation of the MS–DRG relative weights. Comment: One commenter supported our decision to create standard cost centers for CT, MRI, and cardiac catheterization for hospitals to report their costs and charges on the Medicare hospital cost report. In addition, the commenter supported urgently adopting the use of the CT, MRI, and cardiac catheterization cost centers in calculating the MS–DRG relative weights. Response: We appreciate the commenter’s support. As we stated in the proposed rule, we will reassess the availability of data for the ‘‘Implantable Devices Charged to Patients’’ cost center, and the ‘‘MRI, CT Scans, and Cardiac Catheterization’’ cost centers, for the FY 2013 IPPS rulemaking cycle, and, if appropriate, we will propose to create distinct CCRs for these cost centers at that time. Comment: One commenter noted that allogeneic stem cell acquisition charges are reported using revenue code 0819 for ‘‘Other Organ Acquisition.’’ However, the commenter added, this revenue code is not part of the 15 national cost center CCRs used in the calculation of the MS–DRG relative weights. In addition, the commenter stated, the Medicare hospital cost report does not specifically identify a cost center for bone marrow acquisition costs. The commenter requested direction on capturing these acquisition VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 costs and how those costs and charges are accounted for in the MS–DRG relative weight calculation. Response: We appreciate this comment, but note that it is not within the scope of the issues discussed in the FY 2012 IPPS/LTCH PPS proposed rule regarding the calculation of the MS– DRG relative weights. However, we also note that allogeneic bone marrow transplant charges are included in the 15 CCRs, specifically as part of the Blood and Blood Products CCR and that CCR’s associated cost centers on the cost report. Comment: One commenter stated that CMS should specifically exclude sleeve gastrectomy charges derived from the Medicare claims data and sleeve gastrectomy costs from the Medicare hospital cost report data from the MS– DRG weight recalibrations. The commenter noted that CMS excludes Medicare claims for services that are non-covered for Medicare beneficiaries from the MS–DRG relative weight calculation and, therefore, sleeve gastrectomy charges should be excluded. In addition, the commenter recommended that CMS remind providers that Medicare cost reports should exclude charges and costs associated with the sleeve gastrectomy procedure, as it is a noncovered service. Response: We appreciate this comment, but note that it is not within the scope of the issues discussed in the FY 2012 IPPS/LTCH PPS proposed rule regarding the calculation of the MS– DRG relative weights. We will take this issue into consideration for future rulemaking. Comment: One commenter suggested that CMS evaluate the MedPAR claims database to ensure that it is not using Medicare managed care claims data to calculate the MS–DRG relative weights, as CMS has proposed to only use feefor-service claims to calculate the MS– DRG relative weights. Response: We appreciate this comment, but note that it is not within the scope of the issues discussed in the FY 2012 IPPS/LTCH PPS proposed rule regarding the calculation of the MS– DRG relative weights. However, we note that it is already our policy to exclude managed care claims from the MS–DRG relative weights calculation. After consideration of the public comments received, we are not implementing any new CCRs for use in the relative weights calculation for FY 2012. PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 F. Preventable Hospital-Acquired Conditions (HACs), Including Infections 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, 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 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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 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 these 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. This effort is 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 losses on outlier cases before outlier payments are made, hospitals have an incentive to prevent outliers. Second, under the MS–DRG 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 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 set forth proposals, and solicited and responded to public comments, to implement 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); the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule (74 FR 43782); and the FY 2011 IPPS/LTCH PPS proposed rule (75 FR PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 51505 23880) and final rule (75 FR 50080). 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 PPS final rule (75 FR 50080 through 50101), we did not add any categories of additional HACs or make any changes to policies already established under the authority of section 1886(d)(4)(D) of the Act. c. Collaborative Process 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 also have 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. In addition, as discussed below, we have used rulemaking 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:\FR\FM\18AUR2.SGM 18AUR2 51506 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations e. Public Input Regarding Selected and Potential Candidate HACs In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50080 through 50101), we did not add or remove categories of HACs, nor did we make any changes to previously established policies. However, we continue to encourage public dialogue about refinement of the HAC list. Given the timeliness of the HAC discussion, particularly when considered within the context of recent legislative health care reform initiatives, 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 Research Triangle Institute, International (RTI) evaluation on CMS’ Hospital-Acquired Conditions and Present on Admission Indicator Web site available at: https://www.cms. hhs.gov/HospitalAcqCond/. 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 (75 FR 23381) (and as noted in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50081)), 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 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/icdguide10.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.gov/HospitalAcq Cond/. In preparation for the transition to the ICD–10–CM/PCS code set effective October 1, 2013, further information regarding the use of the POA indictor with the ICD–10–CM/PCS classification as it pertains to the HAC policy will be discussed in future rulemaking. In the meantime, we encourage readers to review the educational materials and draft code sets currently available for ICD–10–CM/PCS at the CMS Web site at: https://www.cms.gov/ICD10/. In addition, the draft ICD–10–CM/PCS coding guidelines can be viewed at the CDC Web site at: https://www.cdc.gov/ nchs/data/icd9/10cmguidelines2011. 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 will 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 previous IPPS proposed and final rules, there are five POA indicator reporting options, as defined by the ICD–9–CM Official Guidelines for Coding and Reporting: 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 ......................... In the FY 2009 IPPS final rule (73 FR 48486 through 48487), we adopted final VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 payment policies to: (1) pay the CC/ MCC MS–DRGs for those HACs coded PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 with ‘‘Y’’ and ‘‘W’’ indicators; and (2) not pay the CC/MCC MS–DRGs for those E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.002</GPH> Descriptor Y ........................ W ....................... mstockstill on DSK4VPTVN1PROD with RULES2 Indicator mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations HACs coded with ‘‘N’’ and ‘‘U’’ indicators. Beginning 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. However, for claims that continue to be submitted using the 4010 electronic transmittal standards format, the POA indicator of ‘‘1’’ is still necessary because of reporting restrictions from the use of the 4010 electronic transmittal standards format. Hospitals that began reporting with the 5010 format on and after January 1, 2011, can no longer report a POA indicator of ‘‘1’’ for POA exempt codes. The POA field should instead be left blank for codes exempt from POA reporting. We have issued CMS instructions on this reporting change as a One-Time Notification, Pub. No. 100– 20, Transmittal No. 756, Change Request 7024, effective on August 13, 2010. These instructions, entitled ‘‘5010 Implementation-Changes to Present on Admission (POA) Indicator ‘1’ and the K3 Segment,’’ can be located at the following link on the CMS Web site: https://www.cms.gov/manuals/ downloads/Pub100_20.pdf. We are continuing our efforts to clarify instructions regarding use of the POA indicator. As discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50088), we received public comments in response to the FY 2011 IPPS/LTCH PPS proposed rule that expressed concern about the accuracy of reporting of POA indicators for HACs related to intracranial injury with loss of consciousness. The codes for loss of consciousness are listed in the Falls and Trauma HAC category, within the ‘‘Intracranial Injury’’ subcategory. Because loss of consciousness is a component of intracranial injuries rather than a separate condition, we agreed that the POA guidelines that instructed coders to assign an ‘‘N’’ indicator if any part of the combination code was not present on admission did not apply to the loss of consciousness codes. As a member of the Editorial Advisory Board for the Coding Clinic for ICD–9–CM, we worked with the American Hospital Association (AHA), American Health Information Management Association (AHIMA), and CDC to provide additional clarification on how these conditions should be reported. Additional guidance on how these cases should be reported can be found in AHA’s Coding Clinic for ICD– 9–CM, 2nd Quarter 2010, ‘‘Frequently Asked POA Questions’’ section. That VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 publication clarified the POA reporting for patients in whom a single code captures the fact that the patient was admitted as a result of a head injury and then subsequently lost consciousness after the admission. For these cases, we clarified that the POA indicator assigned should be ‘‘Y,’’ indicating that the head injury and resulting loss of consciousness occurred prior to (and was present on) admission. We expect that this clarification will lead to greater consistency and accuracy in POA indicator reporting for these conditions. We look forward to continuing our efforts as part of the AHA’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 coding and POA reporting. We encourage hospitals to send any other questions about ICD–9–CM codes or POA indicator selection to the AHA 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. 2. Additions and Revisions to the HAC Policy for FY 2012 a. Contrast-Induced Acute Kidney Injury In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25813 and 25814), we discussed our analysis for a proposed new condition as a possible candidate for selection for FY 2012 under section 1886(d)(4)(D) of the Act. As described in more detail in section II.F.1.a. of this preamble, each HAC must be: (1) High cost, high volume, or both; (2) 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 (3) could reasonably have been prevented through the application of evidence-based guidelines. We also discussed other considerations relating to the selection of a HAC, including any administrative or operational issues associated with a proposed condition. For example, the condition may only be able to be identified by multiple codes, thereby requiring the development of special GROUPER logic to also exclude similar or related ICD–9–CM codes from being classified as a CC or an MCC. Similarly, a condition acquired during a hospital stay may arise from another condition that the patient had prior to admission, making it difficult to determine whether the condition was reasonably preventable. We invited public comment on clinical, coding, and PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 51507 prevention issues on our proposal to add contrast-induced acute kidney injury as a condition subject to the HAC payment provision for FY 2012 (for discharges occurring on or after October 1, 2011). Contrast-induced acute kidney injury is a significant complication of the use of iodinated contrast media and accounts for a large number of cases of hospital-acquired acute kidney injury cases. A published study has shown that renal failure associated with contrast administration is correlated with up to 11 percent of cases of renal failure that occur in hospitals (Nash, K., Hafeez, A., et al: ‘‘Hospital-Acquired Renal Insufficiency,’’ American Journal on Kidney Disease, 2002, Vol. 39, No. 5, pp. 930–936). Patients who experience acute kidney injury have an increased risk of inhospital mortality even after adjustments for disease comorbidities (McCullough, J.: ‘‘Contrast-Induced Acute Kidney Injury,’’ Journal of the American College of Cardiology, 2008, Vol. 51, No. 15, pp. 1419–1428). Data suggest that the risk for mortality extends beyond the period of hospitalization, resulting in 1-year and 5-year mortality rates significantly higher than those patients who have not developed acute kidney injury. In addition, contrast-induced acute kidney injury is associated with an increased incidence of myocardial infarction, bleeding requiring transfusion, and prolonged hospital stays (McCullough, J.: American Journal of Medicine, 1997, Vol. 103, pp. 368–375). We note that ‘‘acute kidney injury’’ is a new terminology endorsed by the National Kidney Foundation to replace ‘‘acute renal failure.’’ There is not a unique code that identifies kidney injury. However, kidney injury can be identified as a subset of discharges with ICD–9–CM diagnosis code 584.9 (Acute kidney failure, unspecified). As we discussed in the FY 2012 IPPS/LTCH PPS proposed rule, our clinical advisors believe that diagnosis code 584.9, in combination with the associated procedure codes listed below, can accurately identify contrast-induced acute kidney injury: • 88.40 (Arteriography using contrast material, unspecified site) • 88.41 (Arteriography of cerebral arteries) • 88.42 (Aortography) • 88.43 (Arteriography of pulmonary arteries) • 88.44 (Arteriography of other intrathoracic vessels) • 88.45 (Arteriography of renal arteries) • 88.46 (Arteriography of placenta) • 88.47 (Arteriography of other intraabdominal arteries) E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51508 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations • 88.48 (Arteriography of femoral and other lower extremity arteries) • 88.49 (Arteriography of other specified sites) • 88.50 (Angiocardiography, not otherwise specified) • 88.51 (Angiocardiography of venae cavae) • 88.52 (Angiocardiography of right heart structures) • 88.53 (Angiocardiography of left heart structures) • 88.54 (Combined right and left heart angiocardiography) • 88.55 (Coronary arteriography using a single catheter) • 88.56 (Coronary arteriography using two catheters) • 88.57 (Other and unspecified coronary arteriography) • 88.58 (Negative-contrast cardiac roentgenography) • 88.59 (Intra-operative coronary fluorescence vascular angiography) • 88.60 (Phlebography using contrast material, unspecified site) • 88.61 (Phlebography of veins of head and neck using contrast material) • 88.62 (Phlebography of pulmonary veins using contrast materal) • 88.63 (Phlebography of other intrathoracic veins using contrast material) • 88.64 (Phlebography of the portal venous system using contrast material) • 88.65 (Phlebography of other intraabdominal veins using contrast material) • 88.66 (Phlebography of femoral and other lower extremity veins using contrast material) • 88.67 (Phlebography of other specified sites using contrast material) • 87.71 (C.A.T. of kidney) • 87.72 (Other nephrotomogram) • 87.73 (Intravenous pyelogram) • 87.74 (Retrograde pyelogram) • 87.75 (Percutaneous pyelogram) We proposed to identify contrastinduced acute kidney injury with diagnosis code 584.9 in combination with one or more of the above associated procedure codes. We also considered identifying contrast-induced acute kidney injury through the use of external injury codes, or E-codes. Code E947.8 (Other drugs and medicinal substances) has an inclusion term ‘‘Contrast media used for diagnostic x-ray procedures’’ to identify the use of contrast. However, as we noted in the proposed rule, we do not currently require the reporting of Ecodes for the HAC payment provisions under the IPPS. Therefore, we were unable to rely on the identification of contrast-induced acute kidney injury VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 through E-codes on Medicare IPPS HACs claims. Section 1886(d)(4)(D) of the Act requires that a HAC be a condition that is ‘‘high cost, high volume, or both.’’ In FY 2009, there were 38,324 inpatient discharges coded with acute renal failure as specified by ICD–9–CM diagnosis code 584.9 reported as not present on admission (POA status = N) when reported with one of the above procedure codes submitted through Medicare claims. The cases had an average charge of $29,122 for the entire hospital stay. Studies suggest the additional average cost per day for a patient who has acquired contrastinduced acute kidney injury is $2,654. Other data report patients stays increases by 3.75 days once they have acquired the diagnosis (Subramanian, S.: ‘‘Economic Burden of ContrastInduced Nephropathy: Implications for Prevention Strategies,’’ Journal of Medical Economics, 2007, Vol. 10, pp. 119–134). There are widely recognized guidelines for the prevention of acute kidney injury that address the prevention of contrast-induced acute kidney injury, and we believe the condition is reasonably preventable. One of these guidelines can be found at: https://www.renal.org/Clinical/ GuidelinesSection/AcuteKidneyInjury. aspx. The condition of contrast-induced acute kidney injury as specified in our proposal is a CC under the MS–DRGs. We indicated in the proposed rule that we had not identified any additional administrative or operational difficulties with proposing this condition as a HAC. We invited public comment on whether contrast-induced acute kidney injury meets the requirements set forth under section 1886(d)(4)(D) of the Act, as well as other coding and prevention issues associated with our proposal to add this injury as a condition subject to the HAC payment provision for FY 2012 (for discharges occurring on or after October 1, 2011). We also indicated that we were particularly interested in receiving comments on the degree to which contrast-induced acute kidney injury is reasonably preventable through the application of evidence-based guidelines. Comment: One commenter supported CMS’ proposal to add contrast-induced acute kidney injury as a HAC under section 1886(d)(4)(D) of the Act. The commenter applauded the inclusion of contrast-induced acute kidney injury to the HAC policy for FY 2012, and encouraged CMS to continue to expand and refine the HACs and categories. PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 Response: We appreciate the commenter’s support. Comment: Many commenters discussed their concerns regarding the specificity and sensitivity of the ICD–9– CM codes proposed to identify the proposed new contrast-induced acute kidney injury HAC. The commenters believed that these codes would not solely capture contrast-induced acute kidney injury and would capture other conditions as well. The commenters expressed concern about the specificity of the current ICD–9–CM code 584.9 in reliably identifying cases of acute kidney injury that occurred due to a specific diagnosis instead of acute kidney injury that is believed to occur secondary to being correlated with exposure to contrast. The commenter stated that, for example, a patient admitted to a hospital could experience drug-induced kidney injury that has resolved; later during that hospital stay, the patient has a subsequent angiographic procedure. Under our proposed methodology, the commenter added, this patient would be erroneously identified as having contrast-induced acute kidney injury. Some commenters suggested that CMS use E-codes, which identify injuries, while others did not support the use of E-codes because they are not consistently coded for Medicare billing purposes. Commenters further noted that the list of ICD–9–CM procedure codes proposed to assist in identifying the use of contrast as the reason for the acute kidney injury occurring are often not reported on hospital claims. The commenters explained that most of the codes do not represent procedures affecting payment, are not required, and, therefore, are not reported. Other commenters recommended waiting to finalize this proposed candidate condition until the ICD–10 code set is implemented. The commenters suggested that a unique code to identify and describe contrastinduced acute kidney injury could be proposed in ICD–10, and this would eliminate the coding limitations that currently exist for this condition in ICD–9–CM. Response: We acknowledge the commenters’ concerns regarding the current ICD–9–CM coding issues surrounding contrast-induced acute kidney injury, and that our proposal could inadvertently include claims for beneficiaries who experience acute kidney injury that may not be contrastinduced. We note that, as discussed in the FY 2008 IPPS final rule with comment period (72 FR 47216), under 42 CFR 412.60(d), a hospital has 60 days after the date of the notice of the initial E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations assignment of a discharge to a DRG to request a review of that assignment. The hospital may submit additional information as a part of its request. A hospital that believes a discharge was assigned to the incorrect DRG as a result of application of the payment adjustment for HACs may request review of the DRG assignment by its fiscal intermediary or MAC. However, we also recognize that it is important to be as precise as possible in specifying which codes to use to identify a HAC, and that a lack of precision could increase hospitals’ administrative burden in pursuing these appeals. In addition, we recognize that E-codes do capture injuries and could offer more precision in identifying contrastinduced acute kidney injury than our proposal. We also agree with the commenters who pointed out that Ecodes are currently not required for Medicare billing purposes and, therefore, are inconsistently reported on claims. We note further that because these codes are not required for Medicare IPPS payment purposes, MS– DRG assignments do not currently take E-codes into account. We also appreciate the comments that pointed out that the procedure codes identified in our proposal are often not reported. We note that commenters asserted that these codes were not reported because they did not affect payment. We are concerned that the potential for reduced payment would create a further disincentive to include these procedure codes on Medicare claims. As we stated earlier, we recognize that it is important to be as precise as possible in the interest of payment accuracy in specifying which codes to use to identify a HAC. We also agree that ICD–10 will offer a greater degree of specificity. Currently, no code exists within ICD–10 that would exclusively capture contrastinduced acute kidney injury. We note that, as discussed in the FY 2012 IPPS/ LTCH proposed rule (76 FR 25843), and in section II.G.13.b. of this final rule, a partial code freeze was discussed at multiple meetings of the ICD–9–CM Coordination and Maintenance Committee, and public comment was actively solicited. At the September 15– 16, 2010 meeting, an announcement was made that the ICD–9–CM Coordination and Maintenance Committee will implement a partial freeze of the ICD– 9–CM and ICD–10 (ICD–10–CM and ICD–10–PCS) codes prior to the implementation of ICD–10 on October 1, 2013. There was considerable support for this partial freeze. The partial freeze will be implemented as follows: VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 • The last regular, annual updates to both ICD–9–CM and ICD–10 code sets will be made on October 1, 2011. • On October 1, 2012, there will be only limited code updates to both the ICD–9–CM and ICD–10 code sets to capture new technologies and diseases as required by section 503(a) of Public Law 108–173. • On October 1, 2013, there will be only limited code updates to ICD–10 code sets to capture new technologies and diagnoses as required by section 503(a) of Public Law 108–173. There will be no updates to ICD–9–CM, as it will no longer be used for reporting. • On October 1, 2014, regular updates to ICD–10 will begin. The ICD–9–CM Coordination and Maintenance Committee will continue to meet twice a year during the partial freeze. At these meetings, the public will be asked to comment on whether or not requests for new diagnosis or procedure codes should be created based on the criteria of the need to capture a new technology or disease. Any code requests that do not meet the criteria will be evaluated for implementation within ICD–10 on and after October 1, 2014, once the partial freeze has ended. In summary, we agree with the commenters’ recommendations regarding coding and are deferring decision making regarding the inclusion of contrast-induced acute kidney injury as a HAC until such a time when improved coding is available. Comment: Several commenters submitted comments pertaining to the sufficiency or strength of the evidencebased guidelines in terms of providing information or direction that would lead to the prevention of contrast-induced acute kidney injury 100 percent of the time. The commenters stated that evidence-based guidelines are based on varying levels of evidence, from expert consensus based on opinion (the ‘‘weakest’’ level) to expert consensus based on data produced in randomized controlled trials (the ‘‘strongest’’ level). According to the commenters, in many cases, the guidelines do not address all patient populations. Commenters also stated that current evidence-based guidelines for decreasing the incidence of contrast-induced acute kidney injury are limited. The commenters also noted that new guidelines addressing the topic of contrast-induced acute kidney injury are being published in late summer of 2011 by an international organization, Kidney Disease Improving Global Outcomes (KDIGO), after a multiyear development process. They noted that CMS should take these guidelines into PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 51509 consideration when they become available. Response: We acknowledge that different types of evidence-based guidelines exist. However, we believe that the inclusion of contrast-induced acute kidney injury in the current evidence-based guidelines for Acute Kidney Injury supports the inclusion of contrast-induced acute kidney injury as a condition on the HAC list. We agree that any new evidence-based guidelines for contrast-induced acute kidney injury should be considered when they become available. Comment: A few commenters expressed concern about the proposal potentially creating an incentive for practitioners to avoid necessary contrast use in patients with high risk of acute kidney disease. Response: We acknowledge and are sensitive to the theoretical possibility of patient access to care being restricted. We are unaware of significant data supporting this assertion, but we will continue to monitor the situation for potential unintended consequences with regard to this concern. Comment: Some commenters recommended that CMS not reduce payment for this condition, but to instead develop a quality measure that would track it. The commenters noted that such a measure could track whether the appropriate evidence-based steps to prevent contrast-induced acute kidney injury have been performed and documented. Response: We appreciate the commenters’ recommendation. We note that we did not propose to develop a quality measure for contrast-induced acute kidney injury in the proposed rule. Thus, we consider this comment to be outside of the scope of the provisions discussed in the proposed rule. However, this subject area represents an area of continued interest and opportunity for the agency, and we will take this recommendation into consideration during the development of future rulemaking. In conclusion, after consideration of the public comments we received, we are deferring the decision making on the addition of contrast-induced acute kidney injury as a HAC until future rulemaking, and such a time when improved coding is available for the reasons described above. We note that the reduction of contrast-induced acute kidney injury represents an area of continued interest for the agency, and we believe that substantial opportunity exists for hospitals to improve quality in this area. E:\FR\FM\18AUR2.SGM 18AUR2 51510 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations As we discussed in the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25814), 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. We included in Table 6A of the proposed rule (which was made available via the Internet) the five new ICD–9–CM diagnosis codes that we proposed to add to three of the current HAC categories. We proposed to add two new codes for the Falls and Trauma HAC category, two new codes for the Surgical Site Infection (SSI) Following Certain Bariatric Procedures HAC category, and one new code for the Deep Vein Thrombosis and Pulmonary Embolism (DVT/PE) Following Certain Orthopedic Procedures HAC category. The two new diagnosis codes that we proposed to add to the Falls and Trauma HAC category were code 808.44 (Multiple closed pelvic fractures without disruption of pelvic circle) and code 808.54 (Multiple open pelvic fractures without disruption of pelvic circle). These codes fall within the range of the fracture code subcategory (800 through 829). The two new diagnosis codes that we proposed to add to the Surgical Site Infection (SSI) Following Certain Bariatric Procedures HAC category were code 539.01 (Infection due to gastric band procedure) and code 539.81 (Infection due to other bariatric procedure). We stated our belief that these diagnosis codes are appropriate for inclusion in the existing category when reported as a secondary diagnosis with the specified principal diagnosis code of morbid obesity (code 278.01) and one of the designated bariatric procedure codes (code 44.38, 44.39, or 44.95). Lastly, the one new diagnosis code that we proposed to add to the Deep Vein Thrombosis and Pulmonary Embolism (DVT/PE) Following Certain Orthopedic Procedures HAC category was code 415.13 (Saddle embolus of pulmonary artery). Diagnosis code 415.13 would be applicable when reported along with one of the following procedures codes describing certain orthopedic procedures: 00.85 through 00.87, 81.51, 81.52, or 81.54. Shown in the table below are these five new diagnosis codes with their corresponding descriptions and their proposed CC/MCC designations. Code descriptor b. Additional New Diagnosis Codes for Existing HACs Proposed CC/MCC designation ICD–9–CM code mstockstill on DSK4VPTVN1PROD with RULES2 539.01 539.81 415.13 808.44 808.54 ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... Infection due to gastric band procedure ....................................................................... Infection due to other bariatric procedure ..................................................................... Saddle embolus of pulmonary artery ............................................................................ Multiple closed pelvic fractures without disruption of pelvic circle ............................... Multiple open pelvic fractures without disruption of pelvic circle .................................. We invited public comments on the proposed adoption of these five new ICD–9–CM diagnosis codes as CC/MCCs that are listed above, which, if finalized, would be added to the current Falls and Trauma HAC category, Surgical Site Infection (SSI) Following Certain Bariatric Procedures HAC category and Deep Vein Thrombosis and Pulmonary Embolism (DVT/PE) Following Certain Orthopedic Procedures HAC category and would be subject to the HAC payment provision for FY 2012. Comment: Several commenters supported CMS’ proposal to adopt the five new ICD–9–CM diagnosis codes with their proposed CC/MCC designations for addition to the current Falls and Trauma HAC category, Surgical Site Infection (SSI) Following Certain Bariatric Procedures HAC category, and Deep Vein Thrombosis and Pulmonary Embolism (DVT/PE) Following Certain Orthopedic Procedures HAC category and to subject them to the HAC payment provision for FY 2012. Response: We appreciate the commenters’ support. Comment: One commenter expressed concern regarding the appropriateness of adding ICD–9–CM diagnosis code 415.13 as a condition that, when reported along with the designated procedure codes describing certain orthopedic procedures (00.85 through VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 00.87, 81.51, 81.52, or 81.54) in the Deep Vein Thrombosis and Pulmonary Embolism (DVT/PE) Following Certain Orthopedic Procedures HAC category, be subject to the HAC payment provision. The commenter stated that HAC selection should be based on conditions considered to be reasonably preventable with adherence to evidencebased practice guidelines. The commenter further believed that a saddle embolus of the pulmonary artery, when reported with the cited orthopedic procedure codes, is not a condition that is ‘‘reasonably preventable’’ and that patients undergoing total knee replacement and total hip replacement in the Medicare population are at the highest risk for developing a DVT/PE. The commenter also stated that the current structure of the MS–DRG system does not specifically risk-adjust for these conditions in the MS–DRGs related to primary total hip replacement (code 81.51) or primary total knee replacement (code 81.54). The commenter believed that risk adjustment is an indispensible component of an equitable HAC policy. The commenter suggested that CMS account for the patient-specific risk factors that affect preventability and reported that many hospitalized patients have comorbidities and other patient characteristics that put them at an increased risk of complications. The PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 CC CC MCC CC MCC commenter suggested that CMS take these factors into account in creating a policy that is reasonable and equitable, in order to minimize incentives for limiting access for patients who are at higher risk for complications. This same commenter also expressed support of CMS’ efforts to encourage the adoption of evidence-based treatment guidelines that could improve the quality of care for patients. However, while the commenter noted that evidence-based guidelines can reduce events, the commenter asserted that CMS selected one of the patient populations at highest risk for DVT/PE, diverging from the concept of ‘‘reasonably preventable.’’ Response: We appreciate the commenter’s detailed comments on the proposal to add diagnosis code 415.13 as a condition that, when reported along with the designated procedure codes described above, is subject to the HAC payment provision. In the FY 2008 IPPS final rule with comment period (72 FR 47200 through 47218), we discussed the evidence based guidelines regarding DVT/PE and agreed with commenters that this is reasonably preventable. In the FY 2009 IPPS final rule (73 FR 48481), we addressed commenters’ concerns regarding the preventability of DVT/PE and noted that the statute does not require that a condition be ‘‘always preventable’’’ in order to qualify as an E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations HAC, but rather that it be ‘‘reasonably preventable,’’ which necessarily implies something less than 100 percent. With regard to the commenter’s assertion that risk adjustment is an indispensible component of an equitable HAC policy, we refer readers to the FY 2009 IPPS final rule and the FY 2010 IPPS/RY 2010 LTCH PPS final rule. In the FY 2009 IPPS final rule (73 FR 48487 through 48488), we discussed risk adjustment of payments related to HACs. We addressed this issue again in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43785), where we noted that a risk adjustment methodology may lead to greater precision of HAC payment determinations. As part of the RTI evaluation of the HAC–POA program, the concept of risk adjustment continues to be an important area of interest and study for the agency. We will consider the results of RTI’s evaluation when it is complete and, if appropriate, make a proposal and solicit public comment in future rulemaking. After consideration of the public comments we received, we are finalizing the adoption of the five new ICD–9–CM diagnosis codes described above as CC/MCCs to be added to their respective HAC categories as proposed. Therefore, effective October 1, 2011 (FY 2012), procedure codes 808.44 and 808.54 describing multiple pelvic fractures will be added to the Falls and Trauma HAC category, procedure codes 539.01 and 539.81 describing infections related to gastric procedures will be added to the Surgical Site Infection (SSI) Following Certain Bariatric Procedures HAC category, and procedure code 415.13 describing a type of pulmonary embolus will be added to the Deep Vein Thrombosis and Pulmonary Embolism (DVT/PE) Following Certain Orthopedic Procedures HAC category. All of these conditions will be subject to the HAC payment provision for FY 2012. c. Revision to HAC Subcategory Title After publication of the FY 2011 IPPS/LTCH PPS final rule, we received a comment stating that the subcategory title ‘‘Electric Shock’’ that is included in the Falls and Trauma HAC category was misleading. The commenter stated that this subcategory title did not accurately describe the CC/MCC ICD–9–CM diagnoses codes (991 through 994) contained within this subcategory. The commenter requested that CMS develop a new title that would more accurately describe this group of codes. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25814), we stated that we agreed with the commenter that the HAC subcategory title ‘‘Electric Shock’’ is potentially misleading because the codes included within these ranges contain a variety of injuries, including the following: • Category 991 (Effects of Reduced Temperature) • Category 992 (Effects of Heat and Light) • Category 993 (Effects of Air Pressure) • Category 994 (Effects of Other External Causes) We proposed to change the title of this HAC subcategory from ‘‘Electric Shock’’ to ‘‘Other Injuries’’ because it includes a variety of injury codes. The subcategory will continue to include the codes within the 991 through 994 code ranges appearing on the CC/MCC list. We did not propose any changes to the list of codes in this subcategory; we simply proposed to rename the subcategory title. We invited public comments on the proposed title change to the HAC subcategory from ‘‘Electric Shock’’ to ‘‘Other Injuries’’ for FY 2012. Comment: Several commenters supported CMS’ proposal to change the title of this HAC subcategory from ‘‘Electric Shock’’ to ‘‘Other Injuries’’ because it includes a variety of injury codes. The commenters stated that this title change would better describe the conditions included in the range of codes. Foreign Object Retained After Surgery .................................................... mstockstill on DSK4VPTVN1PROD with RULES2 Air Embolism ............................................................................................ Blood Incompatibility ................................................................................. Pressure Ulcer Stages III & IV ................................................................. Falls and Trauma: —Fracture .......................................................................................... —Dislocation ..................................................................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to change the title of the HAC subcategory from ‘‘Electric Shock’’ to ‘‘Other Injuries.’’ The subcategory will continue to include the codes within the 991 through 994 code ranges appearing on the CC/MCC list. In addition, we are not making any changes to the list of codes in this subcategory; the subcategory title will simply be renamed effective FY 2012. d. Conclusion In the FY 2012 IPPS/LTCH PPS proposed rule, we listed the current HAC categories and the ICD–9–CM codes that identify the conditions and have been finalized through FY 2011. For FY 2012, we proposed that these conditions continue to be subject to the HAC payment provision, along with the creation of a new HAC category for contrast-induced acute kidney injury. (We note that, as discussed in section II.F.2.a. of the preamble of the proposed rule and this final rule, we are not adopting our proposal to add a new HAC category for contrast-induced acute kidney injury for FY 2012.) In addition, we proposed to add five new ICD–9–CM diagnosis codes and to revise the title of the ‘‘Electric Shock’’ subcategory in the Falls and Trauma HAC category. Comment: Several commenters supported maintaining the current HAC categories and the ICD–9–CM codes that identify those conditions. These commenters agreed that the conditions should continue to be subject to the HAC payment provision for FY 2012. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are adopting the following list of HAC categories and the ICD–9–CM codes that identify the conditions that have been finalized through FY 2011 and that we are finalizing in this final rule for FY 2012. CC/MCC (ICD–9–CM Code) HAC PO 00000 Frm 00037 Fmt 4701 998.4 (CC) 998.7 (CC) 999.1 (MCC) 999.60 (CC) 999.61 (CC) 999.62 (CC) 999.63 (CC) 999.69 (CC) 707.23 (MCC) 707.24 (MCC) Codes within these ranges on the CC/MCC list: 800–829 830–839 Sfmt 4700 51511 E:\FR\FM\18AUR2.SGM 18AUR2 51512 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations CC/MCC (ICD–9–CM Code) HAC —Intracranial Injury ........................................................................... —Crushing Injury ............................................................................... —Burn ............................................................................................... —Other Injuries ................................................................................. Catheter-Associated Urinary Tract Infection (UTI) ................................... Vascular Catheter-Associated Infection ................................................... Manifestations of Poor Glycemic Control ................................................. 850–854 925–929 940–949 991–994 996.64 (CC) Also excludes the following from acting as a CC/MCC: 112.2 (CC) 590.10 (CC) 590.11 (MCC) 590.2 (MCC) 590.3 (CC) 590.80 (CC) 590.81 (CC) 595.0 (CC) 597.0 (CC) 599.0 (CC) 999.31 (CC) 250.10–250.13 (MCC) 250.20–250.23 (MCC) 251.0 (CC) 249.10–249.11 (MCC) 249.20–249.21 (MCC) Surgical Site Infections Surgical Site Infection, Mediastinitis, Following Coronary Artery Bypass Graft (CABG). Surgical Site Infection Following Certain Orthopedic Procedures ........... Surgical Site Infection Following Bariatric Surgery for Obesity ............... Deep Vein Thrombosis and Pulmonary Embolism Following Certain Orthopedic Procedures. We refer readers to section II.F.6. of the FY 2008 IPPS final rule with comment period (72 FR 47202 through 47218) and to section II.F.7. of the FY 2009 IPPS final rule (73 FR 48474 through 48486) for detailed analyses supporting the selection of each of the HACs selected through FY 2012. 3. RTI Program Evaluation Summary mstockstill on DSK4VPTVN1PROD with RULES2 a. Background On September 30, 2009, a contract was awarded to Research Triangle Institute, International (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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 519.2 (MCC) And one of the following procedure codes: 36.10–36.19 996.67 (CC) 998.59 (CC) And one of the following procedure codes: 81.01–81.08, 81.23–81.24, 81.31–81.38, 81.83, 81.85 Principal Diagnosis—278.01 539.01 (CC) 539.81 (CC) 998.59 (CC) And one of the following procedure codes: 44.38, 44.39, or 44.95 415.11 (MCC) 415.13 (MCC) 415.19 (MCC) 453.40–453.42 (CC) And one of the following procedure codes: 00.85–00.87, 81.51–81.52, or 81.54 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. In the FY 2011 IPPS/LTCH PPS final rule (50085 through 50101), we summarized the analyses by RTI that had been completed at that time. These RTI analyses of POA indicator reporting, frequencies and net savings associated with current HACs, and frequencies of previously considered candidate HACs reflected MedPAR claims from October 2008 through September 2009. b. FY 2009 Data Analysis As we describe in section II.F.1.f. of this preamble, we have provided instructions to IPPS hospitals and nonIPPS hospitals regarding the submission of POA indicator data for all diagnosis codes on Medicare claims and the PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 processing of non-PPS claims (75 FR 23381) and note 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/ icdguide10.pdf. After publication of the FY 2011 IPPS/LTCH PPS final rule, we identified a discrepancy between the claims data that hospitals submitted and the CMS data file used to calculate the HAC measures. Specifically, this error led to incorrect HAC assignments in cases where a hospital reported an external cause of injury (E-code). Since then, we have corrected this error in the data file. As a result, the RTI analysis of the HAC–POA program that was conducted using FY 2009 claims data was updated using the corrected data file. The corrected data do not appear to have a E:\FR\FM\18AUR2.SGM 18AUR2 51513 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations material impact on our previous findings for FY 2009. Revised data tables were made publicly available on the CMS Web site at https:// www.cms.gov/HospitalAcqCond/ 01_Overview.asp and the RTI Web site at https://www.rti.org/reports/cms/ after publication of the FY 2012 IPPS/LTCH PPS proposed rule. c. FY 2010 Data Analysis RTI’s analysis of the FY 2010 MedPAR data file for the HAC–POA program evaluation was prepared for publication in the FY 2012 IPPS/LTCH PPS proposed rule. We indicated in the proposed rule that we would provide the results from the study on the CMS Web site at https://www.cms.gov/ HospitalAcqCond/01_Overview.asp and on the RTI Web site at https:// www.rti.org/reports/cms/ when it became available. We also stated that we anticipated that the examination of FY 2010 MedPAR data would be completed soon after publication of the proposed rule. We invited public comment on RTI’s analysis of the FY 2010 MedPAR data for the HAC–POA program. Since publication of the FY 2012 IPPS/LTCH proposed rule, we determined that it would be beneficial to the public if we provided a summary of the results of RTI’s HAC–POA program evaluation of the FY 2010 MedPAR data in this FY 2012 IPPS/ LTCH final rule, in addition to making these results available on both the CMS and RTI Web sites mentioned above. Below we present a summary of these results. d. FY 2010 RTI Analysis on POA Indicator Reporting of Current HACs. 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 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. Using MedPAR claims data from October 2009 through September 2010, RTI found a total of approximately 74.38 million secondary diagnoses across approximately 10.2 million discharges. As shown in Chart A below, the majority of all secondary diagnoses (80.94 percent) were reported with a POA indicator of ‘‘Y,’’ meaning the condition was POA. CHART A—POA CODE DISTRIBUTION ACROSS ALL SECONDARY DIAGNOSES Number Percentage Total Discharges in Final File 10,189,168 Total Number of Secondary Diagnoses Across Total Discharges POA Y W N U 1 74,382,681 60,206,593 13,145 5,001,138 2,223,318 6,938,487 Indicator Description: Condition present on admission .......................................................................................................... Status cannot be clinically determined ................................................................................................. Condition not present on admission ..................................................................................................... Documentation not adequate to determine if condition was present on admission ............................ Exempted ICD–9–CM code .................................................................................................................. 100.00 80.94 0.02 6.72 2.99 9.33 Source: RTI Analysis of MedPAR IPPS Claims, October 2009 through September 2010. 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 approximately 10.2 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 189,231 HAC-associated diagnosis codes being reported for that HAC category. Of these 189,231 diagnoses, 5,762 reported a POA indicator of ‘‘N’’ and 326 reported a POA indicator of ‘‘U’’ for not POA. Similarly, 183,048 diagnoses reported a POA indicator of ‘‘Y’’ for POA and 95 diagnoses reported a POA indicator of ‘‘W.’’ The lowest frequency appears in the Surgical Site Infection (SSI) Following Bariatric Surgery for Obesity HAC category with only 18 HAC-associated secondary diagnosis codes (and procedure codes) reported, where 17 diagnoses were reported with a POA indicator of ‘‘N’’ and 1 diagnosis was reported with a POA indicator of ‘‘Y.’’ CHART B—POA STATUS OF CURRENT HACS: OCTOBER 2009 THROUGH SEPTEMBER 2010 mstockstill on DSK4VPTVN1PROD with RULES2 Treated as hospital acquired conditions Frequency as a secondary diagnosis Selected HAC POA = N Not treated as Hospital acquired conditions POA = U POA = Y POA = W Number 1. 2. 3. 4. Foreign Object Retained After Surgery (CC) ............. Air Embolism (MCC) ................................................... Blood Incompatibility (CC) .......................................... Pressure Ulcer Stages III & IV (MCC) ........................ VerDate Mar<15>2010 19:49 Aug 17, 2011 Jkt 223001 PO 00000 565 42 35 120,582 Frm 00039 Percent Number Percent Number Percent Number Percent 278 29 12 1,407 49.2 69.0 34.3 1.2 1 0 0 81 0.2 0.0 0.0 0.1 286 13 23 119,065 50.6 31.0 65.7 98.7 0 0 0 29 0.0 0.0 0.0 0.0 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 51514 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations CHART B—POA STATUS OF CURRENT HACS: OCTOBER 2009 THROUGH SEPTEMBER 2010—Continued Treated as hospital acquired conditions Frequency as a secondary diagnosis Selected HAC POA = N Not treated as Hospital acquired conditions POA = U POA = Y POA = W Number Percent Number Percent Number Percent Number Percent 189,231 18,247 10,066 16,468 40 5,762 3,877 4,346 565 36 3.0 21.2 43.2 3.4 90.0 326 24 25 14 0 0.2 0.1 0.2 0.1 0.0 183,048 14,319 5,673 15,888 4 96.7 78.5 56.4 96.5 10.0 95 27 22 1 0 0.1 0.1 0.2 0.0 0.0 365 220 60.3 1 0.3 144 39.5 0 0.0 18 3,820 17 3,132 94.4 82.0 0 16 0.0 0.4 1 648 5.6 17.0 0 24 0.0 0.6 Total* ........................................................................ mstockstill on DSK4VPTVN1PROD with RULES2 5. Falls and Trauma (MCC & CC) .................................. 6. Catheter-Associated UTI (CC) .................................... 7. Vascular Catheter-Associated Infection (CC) ............. 8. Poor Glycemic Control (MCC) .................................... 9A. Surgical Site Infection Mediastinitis CABG (CC) ..... 9B. Surgical Site Infection Following Certain Orthopedic Procedures (CC) .......................................................... 9C. Surgical Site Infection Following Bariatric Surgery for Obesity (CC) .......................................................... 10. Pulmonary Embolism & DVT Orthopedic (MCC) ..... 359,479 19,681 5.5 488 0.1 339,112 94.3 198 0.1 As described in section II.F.1.f. of this preamble, 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. We also discussed the comments we received urging CMS to 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 (74 FR 43784 and 43785), we also discussed and responded to comments regarding HACs coded with the ‘‘U’’ indicator. As shown in Chart B above, RTI’s analysis provides data on a total of 488 HACassociated secondary diagnoses reported with a POA indicator of ‘‘U.’’ These 488 diagnoses represented 2.4 percent of the 20,169 diagnoses that were considered not POA (that is, POA indicator of ‘‘N’’ or ‘‘U’’). Approximately 3 of the 10 conditions reported no diagnoses with POA indicators of ‘‘U’’: Air embolism, Blood Incompatibility, and two of the three surgical site infections (Mediastinitis after CABG and SSI after bariatric surgery for obesity). For the two most frequently occurring conditions, the Falls and Trauma HAC category and Stage III and/or IV Pressure Ulcers, diagnoses with a POA indicator of ‘‘U’’ represented a small proportion of diagnoses that were considered not POA (that is, POA indicator of ‘‘N’’ or ‘‘U’’). For the Falls and Trauma HAC category, 5.7 percent of diagnoses (326 cases) considered not POA were reported with a POA indicator of ‘‘U.’’ For Stage III and/or IV Pressure Ulcers, 5.4 percent of VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 diagnoses (81 cases) considered not POA were reported with a POA indicator of ‘‘U.’’ These two categories also represented the conditions where diagnoses with a POA indicator of ‘‘U’’ were the highest proportion of diagnoses considered not POA. We consider the range of 0 to 5.7 percent to indicate that ‘‘U’’ is not used with great frequency for these 10 conditions. In the proposed rule, we stated that we did not contemplate a proposal 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.’’ The data analysis described above continues to support our policy. We encourage readers to further review the RTI detailed report which demonstrates the frequency of each individual HAC-associated diagnosis code within the HAC categories. As an example, we note that in the Foreign Object Retained After Surgery HAC category, there are two unique ICD–9– CM diagnosis codes used to identify that condition: diagnosis code 998.4 (Foreign body accidentally left during a procedure) and diagnosis code 998.7 (Acute reaction to foreign substance accidentally left during a procedure). In the detailed RTI report, readers can view that diagnosis code 998.4 was reported 547 times and diagnosis code 998.7 was reported 18 times, across all MS–DRGs, for a total of 565 times. The RTI detailed report is available at the following Web site: https://www.rti.org/ reports/cms/. e. FY 2010 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 with 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 PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 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. Column B shows the percent of discharges reporting a HACassociated diagnosis code relative to the total discharges ‘‘at risk’’ in each HAC category. For HAC categories 1 through 8, both medical and surgical MS–DRGs are included in the total discharges ‘‘at risk’’ so this equates to 10,189,168 discharges. The remaining HAC categories are defined by the combination of diagnosis and procedure codes; therefore, only the surgical MS– DRGs that include the designated procedure codes are included in the total discharges ‘‘at risk.’’ For HAC 9a, the total discharges ‘‘at risk’’ equates to 97,341. For HAC 9b, the total discharges ‘‘at risk’’ equates to 118,815 and for HAC 9c, the total discharges ‘‘at risk’’ equates to 15,698. Lastly, for HAC 10, the total discharges ‘‘at risk’’ equates to 440,571. Column C shows the number of discharges for each HAC reported with a POA indicator of ‘‘N’’ or ‘‘U.’’ For example, there were 42 discharges that reported Air Embolism as a secondary diagnosis. The chart shows that, of these 42 reported discharges, 29 discharges (69.05 percent) had a POA indicator of ‘‘N’’ or ‘‘U’’ and was identified as a HAC discharge. The HAC policy applied to these 29 discharges, and they could, therefore, have had an MS–DRG reassignment. Column E shows the number of discharges where an actual MS–DRG reassignment occurred. For the Air Embolism HAC, Column E shows that the number of discharges that resulted in actual MS–DRG reassignments is 15 (51.72 percent of the 29 discharges with a POA indicator of ‘‘N’’ or ‘‘U’’). Thus, while there were 29 discharges (69.05 percent of the original E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 42 that had air embolism reported as a secondary diagnosis) 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, 15 discharges (51.72 percent) experienced MS–DRG reassignments. There are a number of reasons why a selected HAC reported with a POA indicator of ‘‘N’’ or ‘‘U’’ will 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 317,644 discharges with a HACassociated diagnosis as a secondary diagnosis, 3,587 discharges ultimately resulted in MS–DRG reassignment. As we discuss below, there were 15 claims that resulted in MS–DRG reassignment where 2 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 154,371 discharges. Of these 154,371 discharges, 5,454 (3.53 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 5,454 discharges within this HAC category that were not POA, 1,672 (30.66 percent) resulted in an MS–DRG reassignment. Of the 317,644 total discharges reporting HAC-associated diagnoses as a secondary diagnosis, 3,494 discharges were coded with a secondary diagnosis of PE/DVT Orthopedic. Of these 3,494 discharges, 2,876 (82.31 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 2,876 discharges in this HAC category that were not POA, 1,206 discharges (41.93 percent) resulted in an MS–DRG reassignment. The Pressure Ulcer Stages III & IV category had the second most frequently coded secondary diagnoses, with 114,138 discharges. Of these discharges, 1,444 (1.27 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 1,444 discharges in this HAC category that were not POA, 292 discharges (20.22 percent) resulted in an MS–DRG reassignment. The Catheter-Associated UTI category had the third most frequently coded secondary diagnoses, with 18,247 discharges. Of these discharges, 3,885 (21.29 percent) were coded as not POA and identified as HAC discharges. This category contained the fourth greatest number of discharges resulting in an MS–DRG reassignment. Of the 3,885 discharges in this HAC category that were not POA, 223 discharges (5.74 percent) resulted in a MS–DRG reassignment. The remaining 6 HAC categories only had 194 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 22 of the 4,366 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 364 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 51515 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 6 HAC categories: Pressure Ulcer Stages III and IV (29 cases); Falls and Trauma (263 cases); Catheter-Associated UTI (16 cases); Vascular Catheter-Associated Infection (5 cases); Manifestations of Poor Glycemic Control (50 cases); and Surgical Site Infection Following Certain Orthopedic Procedures (1 case). 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 in the RTI detailed report, which can be found at: https:// www.rti.org/reports/cms/. In summary, Chart C below demonstrates that there were a total of 317,644 discharges with a reported HAC-associated secondary diagnosis. Of the total 317,644 discharges, 6.0 percent, or 19,143 discharges, were HACs reported with a POA indicator of ‘‘N’’ or ‘‘U’’ that were identified as a HAC discharge. Approximately 18.7 percent, or 3,587 discharges, of these 19,143 discharges resulted in MS–DRG reassignments. CHART C—DISCHARGE FREQUENCIES OF CURRENT CMS HACS OCTOBER 2009 THROUGH SEPTEMBER 2010 Discharges with this condition as secondary diagnosis mstockstill on DSK4VPTVN1PROD with RULES2 Selected HAC category Discharges identified as a HAC Discharges that change MS–DRG due to HAC Number (column a) 1. 2. 3. 4. 5. a. Foreign Object Retained After Surgery ....................... Air Embolism ................................................................ Blood Incompatibility .................................................... Pressure Ulcer Stages III & IV .................................... Falls and Trauma ......................................................... Fracture ........................................................................ VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Percent 2 (column b) Number (column c) Percent 3 (column d) Number (column e) Percent 4 (column f) 563 42 35 114,138 .................... 137,888 0.01 0.00 0.00 1.12 .................... 1.35 278 29 12 1,444 .................... 4,700 49.38 69.05 34.29 1.27 .................... 3.41 44 15 0 292 .................... 1,439 15.83 51.72 0.00 20.22 .................... 30.62 E:\FR\FM\18AUR2.SGM 18AUR2 Frm 00041 Fmt 4701 Sfmt 4700 51516 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations CHART C—DISCHARGE FREQUENCIES OF CURRENT CMS HACS OCTOBER 2009 THROUGH SEPTEMBER 2010— Continued Discharges with this condition as secondary diagnosis Selected HAC category Discharges identified as a HAC Percent 2 (column b) Number (column a) Number (column c) Percent 3 (column d) Discharges that change MS–DRG due to HAC Percent 4 (column f) Number (column e) b. Dislocation ................................................................... c. Intracranial Injury ......................................................... d. Crushing Injury ............................................................. e. Burn ............................................................................. f. Electric Shock ............................................................... Less: Discharges with multiple Falls & Trauma .............. 5. Falls and Trauma: Unduplicated Total ........................ 6. Catheter-Associated UTI ............................................. 7. Vascular Catheter-Associated Infection ...................... 8. Poor Glycemic Control ................................................. 9a. SSI Mediastinitis CABG ............................................. 9b. SSI Orthopedic .......................................................... 9c. SSI Bariatric ............................................................... 10. Pulmonary Embolism & DVT Orthopedic .................. 1,105 15,844 41 2,297 818 ¥3,622 154,371 18,247 10,066 16,267 40 363 18 3,494 0.01 0.16 0.00 0.02 0.01 ¥0.04 1.52 0.18 0.10 0.16 0.04 0.31 0.11 0.79 35 706 2 39 9 ¥37 5,454 3,885 4,366 526 36 220 17 2,876 3.17 4.46 4.88 1.70 1.10 ¥1.02 3.53 21.29 43.37 3.23 90.00 60.61 94.44 82.31 4 234 1 6 0 ¥12 1,672 223 22 107 4 2 0 1,206 11.43 33.14 50.00 15.38 0.00 ¥32.43 30.66 5.74 0.50 20.34 11.11 0.91 0.00 41.93 Total 1 ........................................................................ 317,644 .................... 19,143 .................... 3,587 .................... 1 Discharges can appear in more than one row. The total figure is not adjusted for the 94 discharges with more than one HAC that appear as secondary diagnoses (15 of these resulted in MS–DRG reassignment). 2 Percent computed relative to total discharges ‘‘at risk’’ for this HAC. For HACs 1–8, this is 10,189,168. For HAC 9a, this is 97,341. For HAC 9b, this is 118,815. For HAC 9c, this is 15,698. For HAC 10, this is 440,571. 3 Percent computed relative to discharges with condition as a secondary diagnosis. 4 Percent computed relative to discharges with this HAC (Column C). Source: RTI Analysis of MedPAR IPPS Claims, October 2009 through September 2010. An extremely small number of discharges had multiple HACs reported during the same stay. In reviewing the approximately 10.2 million claims, RTI found approximately 94 cases in which 2 HACs were reported on the same discharge. Chart D below summarizes these cases. Thirty-two of the cases with 2 HACs involved Pressure Ulcer Stages III & IV, and 31 cases involved Falls or Trauma. Other multiple HAC cases included 27 Catheter-Associated UTI cases, 3 Vascular Catheter-Associated Infection cases and 1 Foreign Object Retained After Surgery case. There were eight cases in which a Falls and Trauma HAC was reported together with a Pressure Ulcer Stages III & IV HAC. Some of these cases with multiple HACs reported had both HAC codes ignored in the MS–DRG assignment. Of these 66 claims, 49 did not receive higher payments based on the presence of these reported HACs, and we describe these claims in section II.F.3.f.(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. CHART D—CLAIMS WITH MORE THAN ONE HAC SECONDARY DIAGNOSIS OCTOBER 2009 THROUGH SEPTEMBER 2010 4. Pressure ulcer stages III & IV—MCC 5. Falls and trauma—MCC & CC 6. Catheterassociated UTI—CC 7. Vascular catheterassociated infection—CC ........................ ........................ ........................ ........................ 8 8 12 1 ........................ 12 6 2 ........................ ........................ 21 ........................ ........................ ........................ ........................ 1 1 ........................ ........................ 3 ........................ 11 ........................ 6 2 ........................ 1 32 31 27 3 1. Foreign object—CC 5. Falls and trauma—MCC & CC ........................................ 6. Catheter-Associated UTI—CC ......................................... 7. Vascular Catheter-Associated Infection—CC .................. 8. Poor Glycemic Control—MCC ......................................... 9B. Surgical Site Infection Following Certain Orthopedic Procedures—CC .............................................................. 10. Pulmonary Embolism & DVT Orthopedic—MCC .......... Total .............................................................................. mstockstill on DSK4VPTVN1PROD with RULES2 HAC f. 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 VerDate Mar<15>2010 19:46 Aug 17, 2011 Jkt 223001 instances when the MS–DRG assignment does not change even when there is a HAC as a secondary diagnosis (meaning a HAC-associated secondary diagnosis has a POA indicator of either ‘‘N’’ or ‘‘U.’’) In analyzing our claims data, RTI identified four main reasons PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 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 HACassociated secondary diagnosis. Column E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations B shows the frequency of discharges where the HAC-associated secondary diagnosis was coded as not POA and, therefore, 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 result in a change in MS–DRG assignment. Columns D, E, F, and G are explained in more detail below. mstockstill on DSK4VPTVN1PROD with RULES2 (1) Other MCCs/CCs Prevent Reassignment Column D (Other MCC/CCs that Prevent Reassignment) in Chart E below indicates the number of cases reporting a HAC (cases with HAC-associated diagnosis codes with a POA of ‘‘N’’ or ‘‘U’’) 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 156 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 CCs resulted in no change to the MS– DRG assignment. Chart E shows that a total of 11,818 cases with HACs did not have a change in the MS–DRG assignment because of the presence of other reported MCCs and CCs. This represents approximately 76 percent of the 15,556 cases with HACs that did not have a change in MS–DRG assignment. (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 (cases with HAC-associated diagnosis codes with a POA of ‘‘N’’ or ‘‘U’’) 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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) 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 were the only secondary diagnosis reported, then the case would be assigned to MS–DRG 101 (Seizure without MCC). 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 2,282 cases where the HAC code was reported with an ‘‘N’’ or ‘‘U’’ and the MS–DRG assignment did not change because the case was already assigned to the lowest severity level. This represents approximately 15 percent of the 15,556 cases with HACs that did not have a change in MS–DRG assignment. (3) No Severity Levels Column F (Number of MS–DRGs with No Severity Levels) shows the frequency with which discharges with an HAC (cases with HAC-associated diagnosis codes with a POA of ‘‘N’’ or ‘‘U’’) did not result in an MS–DRG change because the MS–DRG that the case was assigned to is not subdivided by 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 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 code for the HAC Stage III pressure ulcer was ignored, the MS–DRG PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 51517 assignment would not change. The case would still be assigned to MS–DRG 311. Chart E below shows that 1,449 cases reporting a HAC (cases with HACassociated diagnosis codes with a POA of ‘‘N’’ or ‘‘U’’) 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). This represents approximately 9 percent of the 15,556 cases with HACs that did not have a change in MS–DRG assignment. (4) MS–DRG Logic Column G (MS–DRG Logic Issues) shows the frequency with which a HAC (cases with HAC-associated diagnosis codes with a POA of ‘‘N’’ or ‘‘U’’) did not result in an MS–DRG change because of MS–DRG assignment logic. There were seven 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 a 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 non-HAC secondary diagnosis code 599.0 (Urinary tract infection, site not specified), having POA indicators of ‘‘Y,’’ ‘‘N,’’ and ‘‘N,’’ respectively, and procedure code 39.73 (Endovascular implantation of graft in thoracic aorta) currently 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 assignment. Other examples of MS– E:\FR\FM\18AUR2.SGM 18AUR2 51518 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 three of the seven cases that did not result in MS–DRG reassignment due to the MS–DRG logic were in the Falls and Trauma HAC category, two cases were in the Catheter Associated UTI HAC category and two cases were in the Vascular Catheter-Associated Infection HAC Category. In conclusion, a total of 15,556 cases (11,818 + 2,282 +1,449 + 7) did not have a change in MS–DRG assignment, regardless of the presence of a HAC. The reasons described above explain why only 3,587 cases had a change in MS– DRG assignment despite the fact that there were 19,143 HACs (cases with HAC-associated diagnosis codes with a POA of ‘‘N’’ or ‘‘U’’). CHART E—REASONS HAC DID NOT CHANGE MS–DRG ASSIGNMENT OCTOBER 2009 THROUGH SEPTEMBER 2010 HAC discharges that do not change MS–DRG Selected HAC category Number of other MCCs/ CCs that prevent reassignment (Column D) Number of MS–DRGs with two severity levels where HAC does not affect MS–DRG assignment * (Column E) Number of MS–DRGs with no severity levels (Column F) 44 15 156 14 67 0 11 0 0 0 12 0 9 0 3 0 114,138 1,444 292 895 0 257 0 154,371 5,454 1,672 2,858 570 351 3 18,247 3,885 223 2,930 490 240 2 10,066 4,366 22 3,656 189 497 2 16,267 526 107 364 3 52 0 40 36 4 24 0 8 0 363 220 2 136 79 3 0 18 17 0 17 0 0 0 3,494 2,876 1,206 759 884 27 0 317,644 19,143 3,587 11,818 2,282 1,449 7 Number of discharges with this condition as secondary diagnosis (Column A) Number of discharges identified as a HAC (Column B) 563 42 278 29 35 Number of HAC discharges that change MS– DRG due to HAC (Column C) 1. Foreign Object Retained After Surgery—CC .................. 2. Air Embolism—MCC 3. Blood Incompatibility—CC .................. 4. Pressure Ulcer Stages III & IV— MCC ......................... 5. Falls and Trauma— MCC & CC ............... 6. Catheter-Associated UTI—CC ................... 7. Vascular CatheterAssociated Infection—CC ................... 8. Poor Glycemic Control—MCC & CC ....... 9A. Surgical Site Infection, Mediastinitis, Following Coronary Artery Bypass Graft (CABG)—MCC ......... 9B. Surgical Site Infection Following Certain Orthopedic Procedures—CC ................ 9C. Surgical Site Infection Following Bariatric Surgery for Obesity—CC ............. 10. Pulmonary Embolism & DVT Orthopedic—MCC & CC ... Total 1 .................... mstockstill on DSK4VPTVN1PROD with RULES2 1 Discharges Other MS– DRG logic issues ** (Column G) can appear in more than one row. The total figure is not adjusted for the approximately 94 discharges with more than one HAC that appear as secondary diagnoses (15 of these discharges resulted in MS–DRG reassignment). * Examples where an HAC classified as a CC would not affect the DRG assignment if it were removed. The MS–DRG is subdivided by the presence or absence of an MCC. A CC would not impact this DRG assignment. ›MS–DRGs 100 and 101 (Seizures with or without MCC, respectively). ›MS–DRGs 102 and 103 (Headaches with or without MCC, respectively). ** Examples where HAC did not change MS–DRG assignment because of the MS–DRG logic. ›MS–DRG 029 (Spinal Procedures with CC or Spinal Neurostimulators). ›MS–DRG 120 (Major Head & Neck Procedures with CC/MCC or Major Device). Source: RTI Analysis of MedPAR IPPS Claims, October 2009 through September 2010. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations g. RTI Analysis of Coding Changes for HAC-Associated Secondary Diagnoses for Current HACs In addition to studying claims from October 2009 through September 2010, RTI evaluated claims data from 3 years prior to determine if there were significant changes in the number of discharges with a HAC-associated code being reported as a secondary diagnosis. To provide consistency with the FY 2010 data studied, RTI examined claims using discharge dates from October 2006 through September 2007 (for FY 2007), October 2007 through September 2008 (for FY 2008), October 2008 through September 2009 (FY 2009) and compared these data to the FY 2010 data. We refer readers to the RTI detailed report for further information regarding all the conditions in each fiscal year (FY 2007 through FY 2010) as described above at the Web site: https:// www.rti.org/reports/cms/. h. RTI Analysis of Estimated Net Savings for Current HACs RTI determined estimates of the net savings generated by the HAC payment policy based on MedPAR claims for FY 2010, from October 2009 through September 2010. mstockstill on DSK4VPTVN1PROD with RULES2 (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 calculate this payment impact, 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 27 of the Medicare Severity GROUPER software (applicable to discharges between October 1, 2009 and September 30, 2010). IPPS MedPAR claims were run through this file to obtain needed HAC–POA output variables. • The FY 2010 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/ VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 AcuteInpatientPPS/IPPS2010, 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 file for FY 2010, as downloaded from the Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS/IPPS2010/. 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 hospital-specific payment rates. • The IPPS impact file for FY 2011, as downloaded from the Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS/11FR/. This file includes indirect medical education (IME) and disproportionate share (DSH) percent adjustments as well as the operating and capital CCRs that were in effect as of March 2010. • CMS historical provider-specific files (PSFs). These files include the indicator to identify providers subject to the full or reduced standardized rates and the applicable operating and capital CCRs. A SAS version was downloaded from the Web site at: https:// www.cms.hhs.gov/ ProspMedicareFeeSvcPmtGen/ 04_psf_SAS.asp. There were 50 providers with discharges in the final HAC analysis file that did not appear in the FY 2010 impact file, of which 11 also did not appear in the FY 2011 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/IPPS2010/. For providers in the FY 2011 file but not the FY 2010 file, we used IME and DSH rates from FY 2011. 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: Re-run 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 PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 51519 modified to accommodate FY 2010 factors. RTI’s first round of computations treated all claims as though paid under standard IPPS rules without adjusting for short-stay transfers or hospital-specific payment amounts. 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 2010 factors. RTI’s first round of computations treated all claims as though paid under standard IPPS rules without adjusting for shortstay transfers or hospital-specific payment amounts. 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 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 MS–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 60 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 2 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 E:\FR\FM\18AUR2.SGM 18AUR2 51520 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 2009 through 2010, 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 15 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 15 discharges with an MS–DRG reassignment resulted in a total net savings of $118,785. Column C shows the net savings per discharge for each HAC category. For the Air Embolism HAC category, the net savings per discharge is $7,919. Because a single discharge can have more than one HAC, discharges can appear in more than one row. The total net savings shown in the last line of Column B is adjusted to avoid duplicate counting and is therefore less than the sum of the net savings from the lines above. CHART F—ESTIMATED NET SAVINGS OF CURRENT HACS OCTOBER 2009 THROUGH SEPTEMBER 2010 Number of discharges that change MS– DRG due to HAC Selected HAC Net savings (in dollars) (Column A) Net savings per discharge (in dollars) Foreign Object Retained After Surgery ....................................................................... Air Embolism ............................................................................................................... Blood Incompatibility .................................................................................................... Pressure Ulcer Stages III & IV .................................................................................... Falls and Trauma: a. Fracture ................................................................................................................ b. Dislocation ............................................................................................................ c. Intracranial Injury .................................................................................................. d. Crushing Injury ..................................................................................................... e. Burn ...................................................................................................................... f. Shock ..................................................................................................................... Less: Discharges with Multiple Falls & Trauma 1 ..................................................... 44 15 0 292 (Column B) $159,841 118,785 0 1,795,456 (Column C) $3,633 7,919 0 6,149 1,439 4 234 1 6 0 ¥12 8,119,308 13,244 1,127,066 7,826 15,594 0 ¥82,330 5,642 3,311 4,817 7,826 2,599 0 ¥6,861 5. Falls and Trauma: Unduplicated Total .......................................................... 6. Catheter-Associated UTI ............................................................................................. 7. Vascular Catheter-Associated Infection ...................................................................... 8. Poor Glycemic Control ................................................................................................ 9a. SSI Mediastinitis CABG ............................................................................................. 9b. SSI Orthopedic .......................................................................................................... 9c. SSI Bariatric ............................................................................................................... 10. Pulmonary Embolism & DVT Orthopedic .................................................................. 1,672 223 22 107 4 2 0 1,206 9,200,708 696,662 77,690 604,308 32,392 15,044 0 8,826,912 5,503 3,124 3,531 5,648 8,098 7,522 0 7,319 Total .......................................................................................................................... 3,587 21,527,798 6,002 Less: Discharges with Multiple HACs 2 .................................................................... ¥15 ¥77,703 ¥5,180 Unduplicated Total ............................................................................................ 3,572 21,450,095 6,005 1. 2. 3. 4. 5. 1 Discharges mstockstill on DSK4VPTVN1PROD with RULES2 can have more than one Falls and Trauma HAC and therefore appear in more than one row. 2 Discharges can have more than one HAC and therefore appear in more than one row. Source: RTI Analysis of MedPAR IPPS Claims, October 2009 through September 2010. As shown in Chart F above, the unduplicated total net savings calculated for the 12-month period from October 2009 through September 2010 was approximately $21.5 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 approximately $19.83 million of net savings for the 12month period. Estimated net savings for the 12-month period associated with the Falls and Trauma category were approximately $9.20 million. Estimated net savings associated with Orthopedic PE/DVT for the 12-month period were VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 approximately $8.83 million. Estimated net savings for the 12-month period associated with Pressure Ulcer Stages III & IV were approximately $1.80 million. The mean net savings per discharge calculated for the 12-month period from October 2009 through September 2010 was approximately $6,005. 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 PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 HACs was low. With the exception of Blood Incompatibility and SSI Following Bariatric Surgery for Obesity, where no savings occurred because no discharges resulted in MS–DRG reassignment, Catheter-Associated UTI had the lowest net savings per discharge. We refer readers to the RTI detailed report available at the Web site: https:// www.rti.org/reports/cms/. As mentioned previously, an extremely small number of cases in the 12-month period of FY 2010 analyzed by RTI had multiple HACs during the same stay. In reviewing approximately 10.2 million claims, RTI found E:\FR\FM\18AUR2.SGM 18AUR2 51521 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations approximately 94 cases where 2 HACs were reported on the same admission as noted in section II.F.3.g.(2) of this preamble. Of these approximately 94 claims, 15 resulted in MS–DRG reassignment. Chart G below summarizes these cases. There were 15 cases that had 2 HACs not POA that resulted in an MS–DRG reassignment. Of these, four discharges involved Pressure Ulcer Stages III & IV, four discharges involved Falls and Trauma, and seven discharges involved Vascular Catheter-Associated Infection. CHART G—CLAIMS WITH MORE THAN ONE HAC SECONDARY DIAGNOSIS WHERE MS–DRG REASSIGNMENT OCCURRED OCTOBER 2009 THROUGH SEPTEMBER 2010 Selected HAC 4. Pressure Ulcer Stages III & IV– MCC 5. Falls and Trauma—MCC & CC 7. Vascular Catheter-Associated Infection—CC 5. Falls and Trauma—MCC & CC ................................................................................... 6. Catheter-Associated Urinary Tract Infection (UTI)—CC ............................................. 7. Vascular Catheter-Associated Infection—CC ............................................................. 9B. Surgical Site Infection Following Certain Orthopedic Procedures—CC ................... 2 1 1 ............................ ............................ 2 2 ............................ ............................ 6 ............................ 1 Total .......................................................................................................................... 4 4 7 As we discuss in section II.F.1.b. of this preamble, implementation of this policy is the part of an array of Medicare VBP tools that we are using to promote increased quality and efficiency of care. We 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 would 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 Hospital IQR Program.) It is our intention to continue to monitor trends associated with the frequency of these HACs and the estimated net payment impact through RTI’s program evaluation and possibly beyond. i. 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 approximately 10.2 million discharges), as well as the POA indicator assignments for these conditions. Chart H below indicates that the four 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 90,243 secondary diagnoses codes being reported for that condition, of which 29,306 reported a POA indicator of ‘‘N’’; (2) Methicillin-Resistant Staphylococcus aureus, with a total of 72,313 secondary diagnoses codes being reported for that condition, with 2,165 of those reporting a POA indicator of ‘‘N’’; and (3) Staphylococcus aureus Septicemia, with a total of 24,327 secondary diagnoses codes being reported for that condition, with 5,490 of those reporting a POA indicator of ‘‘N’’; and (4) Iatrogenic Pneumothorax, with a total of 22,506 secondary diagnoses codes being reported for that condition, with 19,581 of those reporting a POA indicator of ‘‘N.’’ As these four 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 one previously considered HAC diagnosis code can be reported per discharge (on a single claim) that the frequency of these diagnosis codes may be more than the actual number of discharges with a previously considered candidate condition reported as a secondary diagnosis. CHART H—POA STATUS OF PREVIOUSLY CONSIDERED ‘‘CANDIDATE’’ HAC CONDITIONS—OCTOBER 2009 THROUGH SEPTEMBER 2010 Not Present on Admission Frequency as a secondary diagnosis Previously considered HAC condition POA = N Present on Admission POA = U POA = Y POA = W mstockstill on DSK4VPTVN1PROD with RULES2 Number 1. 2. 3. 4. 5. 6. 7. Clostridium Difficile-Associated Disease (CDAD) ....... Delirium ....................................................................... Legionnaire’s Disease ................................................. Staphylococcus aureus Septicemia ............................ Methicillin-Resistant Staphylococcus aureus .............. Iatrogenic Pneumothorax ............................................ Ventilator-Associated Pneumonia ............................... In Chart I below, Column A shows the number of discharges for each previously considered candidate HAC category when the condition was VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 90,243 757 426 24,327 72,313 22,506 4,278 Percent Number Percent Number Percent Number Percent 29,306 190 27 5,490 2,165 19,581 3,159 32.47 25.10 6.34 22.57 2.99 87.00 73.84 416 .............. 2 65 124 15 5 0.46 .............. 0.47 0.27 0.17 0.07 0.12 60,397 567 397 18,738 70,008 2,907 1,110 66.93 74.90 93.19 77.03 96.81 12.92 25.95 124 0 0 34 16 3 4 0.14 0.00 0.00 0.14 0.02 0.01 0.09 reported as a secondary diagnosis. For example, there were 90,243 discharges that reported CDAD as a secondary diagnosis. Previously considered PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 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). E:\FR\FM\18AUR2.SGM 18AUR2 51522 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 90,243 discharges, 29,722 discharges (32.94 percent) had a POA indicator of ‘‘N’’ or ‘‘U.’’ Therefore, there were a total of 29,722 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 830 (2.79 percent). Thus, while there were 29,722 discharges with CDAD reported with a POA indicator of ‘‘N’’ or ‘‘U’’ that could potentially have had an MS–DRG reassignment, the result was 830 (2.79 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 214,785 discharges with a previously considered candidate HACs reported as a secondary diagnosis. Of those 60,538 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 3,768. CHART I—PREVIOUSLY CONSIDERED ‘‘CANDIDATE’’ HAC DISCHARGE FREQUENCIES—OCTOBER 2009 THROUGH SEPTEMBER 2010 Discharges with this condition not present on Admission (POA = ‘‘N’’ or ‘‘U’’) 3 Discharges with this condition as secondary diagnosis 2 Previously considered HAC condition Cases that could change MS–DRG due to previously considered candidate HAC 4 Number (Column A) Number (Column C) Percent (Column D) Number (Column E) Percent (Column F) Clostridium Difficile-Associated Disease (CDAD) ....... Delirium ........................................................................ Legionnaire’s Disease ................................................. Staphylococcus aureus Septicemia ............................. Methicillin-Resistant Staphylococcus aureus .............. Iatrogenic Pneumothorax ............................................. Ventilator-Associated Pneumonia ................................ 90,243 757 426 24,288 72,287 22,506 4,278 0.89 0.01 0.00 0.24 0.71 0.22 0.04 29,722 190 29 5,549 2,288 19,596 3,164 32.94 25.10 6.81 22.85 3.17 87.07 73.96 830 14 3 97 0 2,821 3 2.79 7.37 10.34 0.02 0.00 14.40 0.09 Total 1 ........................................................................ 1. 2. 3. 4. 5. 6. 7. Percent (Column B) 214,785 .................... 60,538 .................... 3,768 .................... 1 Discharges can appear in more than one row. computed relative to total cases ‘‘at risk,’’ which is 10,189,168 for all candidate conditions. computed relative to discharges with condition as a secondary diagnosis. 4 Percent computed relative to discharges with condition as a secondary diagnosis and identified as a previously considered HAC (that is, coded as not present on admission). Source: RTI Analysis of MedPAR IPPS Claims, October 2009 through September 2010. 2 Percent 3 Percent mstockstill on DSK4VPTVN1PROD with RULES2 j. Current and Previously Considered Candidate HACs—RTI Report on Evidence-Based Guidelines The RTI program evaluation includes an annual 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 conditions. In addition, evidence-based guidelines were also found for the previously considered candidate conditions. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 RTI prepared the annual report to summarize its findings regarding evidence-based guidelines, which can be found on the Web site at: https:// www.rti.org/reports/cms. k. Final Policy Regarding Current HACs and Previously Considered Candidate HACs We believe that the 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 (72 FR 47200 through 47218), the FY 2009 IPPS final rule (73 FR 48471 through 48491), and the FY 2010 IPPS/RY 2010 LTCH final rule (74 FR 43782 through 43785). We note that we are finalizing revisions to the Falls and Trauma HAC category, Surgical Site Infection Following Certain Bariatric procedures and DVT/ PE Following Certain Orthopedic Procedures HAC categories as discussed in section II.F.2. of this preamble. (We also note that, as discussed in section PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 II.F.3.b. of this preamble, we are not contemplating changing 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 2012 IPPS/LTCH PPS proposed rule (76 FR 25816), 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 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations claims data. Below, we summarize the public comments that we received, if any, on our proposals, present our responses, and state our final policies. 1. Pre-Major Diagnostic Categories (PreMDCs) a. Noninvasive Mechanical Ventilation We received a request from the National Association for Medical Direction of Respiratory Care (NAMDRC) which suggested that we create a new MS–DRG for patients with certain respiratory conditions who receive noninvasive mechanical ventilation (NIV). The requestor stated that patients who receive NIV are almost always placed within an intensive care unit (ICU) or an emergency department and use the resources available in those areas. The requestor recommended that this new MS–DRG recognize current practice and allow for appropriate reimbursement for the technical complexity and monitoring required for NIV as a form of acute life support. According to the requestor, NIV has evolved to become first-line supportive therapy for several forms of acute respiratory failure. Lastly, the requestor recommended that the new MS–DRG identify NIV usage of approximately 6 to 12 hours to account for the ‘‘legitimate but very short term use of this therapy.’’ Historically, the concept of mechanical ventilation for critically ill patients included establishment of an artificial airway, invasively, through endotracheal intubation or a tracheostomy. According to the requestor, a significant portion of these patients can now be treated through noninvasive mechanical ventilation with the use of a face or nasal mask. In the ICD–9–CM classification system, NIV is described by procedure code 93.90 (Noninvasive mechanical ventilation), while invasive mechanical ventilation is described by procedure codes 96.70 (Continuous invasive mechanical ventilation of unspecified duration), 96.71 (Continuous invasive mechanical ventilation for less than 96 consecutive hours), and 96.72 (Continuous invasive mechanical ventilation for 96 consecutive hours or more). The requestor submitted external data to illustrate trends in NIV use over the past decade. These data were derived from a survey conducted during 2002–2003 of several hospitals located in Massachusetts and Rhode Island. The requestor believed that these data indicate patients with exacerbation of chronic obstructive pulmonary disease (COPD), acute pulmonary edema, or worsening congestive heart failure are successfully managed with NIV. For the FY 2012 IPPS/LTCH PPS proposed rule, we analyzed FY 2010 MedPAR claims data that are representative of the respiratory conditions the requestor identified when reported with NIV. We found 14 MS–DRGs reporting procedure code 93.90 using the above specifications. The MS–DRGs are as follows: Pre-MDC MS–DRGs: • MS–DRG 003 (ECMO or Tracheostomy with Mechanical Ventilation 96+ Hrs or PDX Except Face, Mouth & Neck with Major O.R.) • MS–DRG 004 (Tracheostomy with Mechanical Ventilation 96+ Hrs or PDX Except Face, Mouth & Neck without Major O.R.) • MS–DRGs: • MS–DRG 189 (Pulmonary Edema & Respiratory Failure) • MS–DRG 190 (Chronic Obstructive Pulmonary Disease with MCC) • MS–DRG 191 (Chronic Obstructive Pulmonary Disease with CC) • MS–DRG 192 (Chronic Obstructive Pulmonary Disease without CC/MCC) • MS–DRG 204 (Respiratory Signs & Symptoms) • MS–DRG 207 (Respiratory System Diagnosis with Ventilator Support 96+ Hours) mstockstill on DSK4VPTVN1PROD with RULES2 MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 • MS–DRG 208 (Respiratory System Diagnosis with Ventilator Support <96 Hours) • MS–DRG 222 (Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock with MCC) • MS–DRG 223 (Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock without MCC) • MS–DRG 291 (Heart Failure & Shock with MCC) • MS–DRG 292 (Heart Failure & Shock with CC) • MS–DRG 293 (Heart Failure & Shock without CC/MCC) As shown in the list above and in the chart below, the MS–DRGs identified also include those that describe invasive mechanical ventilation. The ICD–9–CM coding convention instructs the reporting of both types of mechanical ventilation when patients are admitted on noninvasive mechanical ventilation that subsequently requires invasive mechanical ventilation therapy. The data demonstrate that, in certain MS–DRGs, for example, MS–DRGs 003, 004, and 222 that the cases with NIV primarily have shorter lengths of stay and lower average costs compared to all the cases in those MS–DRGs. Alternatively, the data for MS–DRGs 189, 190, 191, and 192 demonstrate that the cases with NIV have an increased length of stay and higher average costs, but a relatively low volume compared to all the cases in those MS–DRGs. Combining the current surgical and medical MS–DRGs into a single, new MS–DRG would include noninvasive mechanical ventilation cases with a wide range of costs for several indications with varying levels of severity. The average costs for these cases range from a low of $5,794 in MS– DRG 293 to a high of $95,940 in MS– DRG 003. In the proposed rule, we indicated that we believe the cases are more appropriately assigned and reimbursed in the MS–DRGs to which they are currently assigned. Number of cases 003—All cases ................................................................................................ 003—Cases with code 93.90 without code 96.70, 96.71, or 96.72 ............... 004—All cases ................................................................................................ 004—Cases with code 93.90 without code 96.70, 96.71, or 96.72 ............... 189—All cases ................................................................................................ 189—Cases with code 93.90 without code 96.70, 96.71, or 96.72 ............... 190—All cases ................................................................................................ 190—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ 191—All cases ................................................................................................ 191—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ 192—All cases ................................................................................................ 192—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ 204—All cases ................................................................................................ 204—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ 207—All cases ................................................................................................ Frm 00049 Fmt 4701 Sfmt 4700 51523 Average length of stay 18,223 58 19,599 170 87,668 22,023 130,731 8,450 135,851 4,563 115,153 2,334 21,049 265 32,752 E:\FR\FM\18AUR2.SGM 34.7 33.3 25.79 25.43 5.36 6.07 5.30 6.78 4.49 5.41 3.52 4.25 2.61 4.17 14.61 18AUR2 Average costs $103,492 95,940 63,022 58,500 8,317 10,383 7,140 11,207 6,236 8,819 4,621 6,803 4,310 7,591 32,897 51524 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations MS–DRG mstockstill on DSK4VPTVN1PROD with RULES2 MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG Number of cases 207—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ 208—All cases ................................................................................................ 208—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ 222—All cases ................................................................................................ 222—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ 223—All cases ................................................................................................ 223—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ 291—All cases ................................................................................................ 291—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ 292—All cases ................................................................................................ 292—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ 293—All cases ................................................................................................ 293—Cases with code 93.90 without code 96.70, 96.71 or 96.72 ................ As mentioned in the requestor’s comments, and our clinical advisors agree, NIV encompasses a broad range of interventions and utilizes periods of time that range from a few hours to a few days of continuous chronic use. Resource requirements are vastly different for the various intended indications. For example, as also noted by the requestor, respiratory failure can have many forms. Our clinical advisors provided three subsets of patients as an example: Those that are given oxygen support, those that are given pressure (rate) support, and those that are intubated. There is overlap between the three subsets in that a patient may require one, two, or all three types of therapy and there are multiple options for any given patient. Our clinical advisors stated that these various subsets of patients can require significantly different resources. Lastly, respiratory failure reflects the severity of the diagnosis (it is a complication) while NIV is a therapeutic option. Unlike a major surgical intervention where the intervention creates morbidity, NIV merely reflects the severity of the underlying respiratory failure. The requestor further noted in its comments that a significant number of patients who receive NIV fail this therapy and must be intubated and subsequently placed on a ventilator. However, those patients who require both noninvasive and invasive mechanical ventilation are already accounted for in the invasive mechanical ventilation MS–DRGs. Similar to patients with respiratory failure, patients with heart failure and shock have a comparable severity of illness where each condition reflects the severity of the diagnosis (it is a complication). Therefore, the cost is already reflected in the high resource expenditure estimates for MS–DRGs 222, 223, 291, 292, and 293, as are all other severity-correlated resource costs. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 In conclusion, we indicated in the proposed rule that we believe that the data do not support the creation of a single MS–DRG to identify NIV cases. As stated previously, the average costs for the NIV cases range from a low of $5,794 in MS–DRG 293 to a high of $95,940 in MS–DRG 003. If created, this single MS–DRG would include patients with a wide range in average costs. We believe the cases are more appropriately captured in their current MS–DRGs. In addition to the clinical points raised by our clinical advisors and outlined above, the volume and length of stay data for cases where NIV was reported with the specified respiratory conditions further support their present MS–DRG assignments. Therefore, we did not propose to create a new MS– DRG for patients receiving NIV. We invited public comment on our proposal not to create a new MS–DRG for patients receiving NIV for FY 2012. Comment: Several commenters agreed with CMS’ proposal to not create a new MS–DRG for patients receiving NIV for FY 2012. One commenter did not have a position on whether or not a new MS– DRG should be created for patients receiving noninvasive mechanical ventilation. However, the commenter was concerned that reported hospital data may be incomplete. The commenter indicated that procedure code 93.90 (Noninvasive mechanical ventilation) is most likely underreported or not reported consistently because it is not required for reporting purposes. Another commenter stated that the data analysis performed on patients receiving NIV appeared to be supported by the current MS–DRG assignment. Therefore, the commenter agreed with the proposal not to create a new MS–DRG. This commenter also urged CMS to consider the Uniform Hospital Discharge Data Set (UHDDS) definition of a ‘‘reportable condition’’ in future analyses. This commenter noted that the UHDDS requires all significant procedures to be PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 Average length of stay 0 67,724 0 2,279 52 3,230 19 170,399 14,274 220,031 5,171 98,134 1,381 0 6.98 0 11.98 11.79 6.17 11.05 6.05 6.95 4.72 5.58 3.20 3.43 Average costs 0 14,742 0 57,478 55,011 41,754 47,064 9,585 12,320 6,584 9,180 4,410 5,794 reported and that Medicare requires the reporting of any procedure that affects payment, whether or not it meets the definition of significant procedure. This commenter further noted that procedure code 93.90 is not considered significant by the UHDDS definition nor does it affect payment. Response: We appreciate the commenters’ support of our proposal to not create a new MS–DRG for patients receiving NIV for FY 2012. We agree with the commenters that procedure code 93.90 is likely not reported consistently and, therefore, the data included in evaluating the request may be incomplete. We encourage complete and accurate reporting of ICD–9–CM codes on each admission. As discussed in section II.G.13.b. of this final rule, we have expanded our ability to accept and process up to 25 diagnosis codes and 25 procedure codes with the implementation of 5010. We agree with the commenters who state that the current data do not support a new MS– DRG for patients receiving NIV. We also agree with the commenter that NIV (procedure code 93.90) is not considered to be a significant procedure under UHDDS definitions and does not affect payment under Medicare policy. UHDDS definitions are used by hospitals to report inpatient data elements in a standardized manner. For further information regarding UHDDS data elements and their definitions, we refer readers to the July 31, 1985 Federal Register (50 FR 31038 through 31040) and the Internet Web site at: https://www.ncvhs.hhs.gov/ncvhsr1.htm. Comment: The organization that submitted the original request to create a new MS–DRG for NIV expressed appreciation to CMS for considering their request and for providing data that was unavailable to them at the time they submitted their original request. The commenter also acknowledged the potential for underreporting of NIV (procedure code 93.90). However, the commenter specifically asked to further E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations refine their original request based on the data that were displayed in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25818). The commenter suggested that CMS now limit consideration of a new MS–DRG for NIV to only the data that were displayed for 4 of the 14 MS– DRGS analyzed in response to their original request. The commenter asked CMS to now only focus on the data that was provided for the following MS– DRGs: • MS–DRG 189 (Pulmonary Edema & Respiratory Failure) • MS–DRG 190 (Chronic Obstructive Pulmonary Disease with MCC) • MS–DRG 191 (Chronic Obstructive Pulmonary Disease with CC) • MS–DRG 192 (Chronic Obstructive Pulmonary Disease without CC/MCC) The commenter recommended that CMS utilize respiratory failure, pulmonary edema, and chronic obstructive pulmonary disease as diagnoses that, when present with NIV, define the structure of a new NIV MS– DRG. Response: We acknowledge the commenter’s request that we now consider a refined request that focuses on only 4 of the 14 MS–DRGs originally analyzed. However, due to time constraints, we were unable to conduct the necessary analysis for evaluation. We would need to perform a new and separate analysis with exact specifications that were not provided by the commenter in their modified request before we could make a final determination. For example, there are numerous ICD–9–CM codes that describe respiratory failure, pulmonary edema, and chronic obstructive pulmonary disease. The commenter did not specify the exact codes they believe would warrant this modified MS–DRG when reported with procedure code 93.90 (NIV) for us to conduct a thorough analysis in time to include our evaluation in this final rule. Therefore, after consideration of public comments we received, we are finalizing our proposal to not create a new MS–DRG for NIV for FY 2012. mstockstill on DSK4VPTVN1PROD with RULES2 b. Debridement With Mechanical Ventilation Greater Than 96 Hours With Major Operating Room (O.R.) Procedure We received a comment concerning the use of excisional debridement in cases with complications that lead to the need for extended mechanical ventilation. The commenter stated that patients undergoing procedures such as excisional debridement may also develop extensive complications such as respiratory failure and sepsis. The commenter indicated that these patients VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 tend to use significant resources. The commenter stated that these cases are currently assigned to MS–DRG 207 (Respiratory System Diagnosis with Ventilator Support 96+ Hours) or MS– DRG 870 (Septicemia with or Severe Sepsis with Mechanical Ventilation 96+ Hours). The commenter expressed a concern that the operating room (OR) procedure of the excisional debridement was not fully recognized through either of these two medical MS–DRGs. The commenter requested that a new MS– DRG be created that would include mechanical ventilation of greater than 96 hours with the presence of an additional major OR procedure. We agree that patients with long-term mechanical ventilation greater than 96 hours and a major OR procedure utilize extensive resources. However, we point out that these patient cases are not currently assigned to MS–DRG 207 or MS–DRG 870 as the commenter stated. Many of these long-term mechanical ventilation patient cases are instead assigned to MS–DRG 003 (ECMO or Tracheostomy with Mechanical Ventilation 96+ Hours or PDX, Excluding Face, Mouth & Neck with Major Operating Room Procedure). Cases that require mechanical ventilation for greater than 96 hours, that have a tracheostomy performed, and that have a procedure on the major O.R. list (including excisional debridement) are assigned to MS–DRG 003. We specifically created MS–DRG 003 to capture these complicated patients on long-term mechanical ventilation who also have a major O.R. procedure. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule, we did not propose to create a second MS–DRG to capture these patients. We welcomed public comments on our proposal not to create a new MS–DRG for these patients for FY 2012. Comment: Several commenters supported our proposal not to create a second MS–DRG to capture patients with mechanical ventilation of greater than 96 hours with the presence of an additional major OR procedure. One commenter stated that the limited data and documentation from the requestor for the creation of a second MS–DRG prohibited them from evaluating the need for this new MS–DRG. Response: We agree with the commenters that CMS should not create a second MS–DRG to capture patients with mechanical ventilation of greater than 96 hours with the presence of an additional major OR procedure. MS– DRG 003 (ECMO or Tracheostomy with Mechanical Ventilation 96+ Hours or PDX, Excluding Face, Mouth & Neck PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 51525 with major Operating Room Procedure) appropriately captures these patients. After consideration of the public comments we received, we are not creating a new MS–DRG to capture patients on mechanical ventilation of greater than 96 hours who also have an additional major OR procedure for FY 2012. c. Autologous Bone Marrow Transplant In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50101), effective October 1, 2011, we deleted MS–DRG 009 (Bone Marrow Transplant) and created two new MS–DRGs: MS–DRG 014 (Allogeneic Bone Marrow Transplant) and MS–DRG 015 (Autologous Bone Marrow Transplant). We created new MS–DRGs 014 and 015 because of differences in costs associated with these procedures. During the comment period for the FY 2011 IPPS/LTCH PPS proposed rule, two commenters who supported the proposed reclassification of the bone marrow transplant MS– DRGs requested further refinement to account for severity of illness. At that time, we did not subdivide MS–DRG 014 and MS–DRG 015 based on severity of illness because they did not meet our criteria for subdivision (75 FR 50102). As we outlined in our FY 2008 IPPS/ LTCH PPS final rule with comment period (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. The original criteria were based on average charges; we now use average costs (FY 2007 IPPS final rule, 71 FR 47882). 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 cost 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 cost between subgroups. • There is a $2,000 difference in average cost between subgroups. For the FY 2012 IPPS/LTCH PPS proposed rule, we examined FY 2010 MedPAR claims data for these newly created MS–DRGs, and based on these criteria, we identified MS–DRG 015 as a possible MS–DRG that would require further subdivision. MS–DRG 014 was not identified, as this MS–DRG did not meet the criteria stated above for possible subdivision. Autologous bone E:\FR\FM\18AUR2.SGM 18AUR2 51526 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations marrow transplantation utilizes the patient’s own bone marrow or stem cells in the treatment of certain cancers and bone marrow diseases. These procedures restore stem cells that have been destroyed either by chemotherapy and/or radiation treatment. In our analysis, we found 1,338 total cases assigned to MS–DRG 015 with average costs of approximately $38,608 and an average length of stay of approximately 18.8 days. There were 1,092 cases that had a secondary diagnosis code reported on the claim that was designated as a CC or an MCC with average costs of approximately $40,974 and an average length of stay of approximately 19.7 days. There were 246 cases without a secondary diagnosis code reported on the claim that had a CC or an MCC designation with average cost of approximately $28,105 and an average length of stay of approximately 14.6 days. The following table illustrates our findings: Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with RULES2 MS–DRG 015—All cases ........................................................................................................................ MS–DRG 015—Cases with MCC/CC ..................................................................................................... MS–DRG 015—Cases without MCC/CC ................................................................................................ We found that the cases reported with a secondary diagnosis code of a CC or an MCC were more costly and had a longer average length of stay than both the overall cases assigned to MS–DRG 015 and the cases without a CC or an MCC. The cases without a CC or an MCC were less costly and had a shorter average length of stay than both the cases with a CC or an MCC and the overall cases assigned to that MS–DRG. Based on our analysis, all five criteria for a subgroup division were met, thereby supporting a 2-level severity split for MS–DRG 015. Therefore, for FY 2012, we proposed to delete MS–DRG 015 and create two new MS–DRGs: • Proposed MS–DRG 016 (Autologous Bone Marrow Transplant with MCC/ CC); and • Proposed MS–DRG 017 (Autologous Bone Marrow Transplant without MCC/ CC). We invited public comment on our proposal to delete MS–DRG 015 and create two new MS–DRGs 016 and 017 for autologous bone marrow transplant for FY 2012. Comment: Several commenters supported our proposed changes for a 2level severity split for autologous bone marrow transplant cases. One commenter stated that it appreciated CMS’ further refinement to account for severity of illness as it reflects current experience with transplant eligible patients who present with a range of comorbidities and other complicating factors. Response: We appreciate the support of the commenters. Comment: One commenter disagrees with our proposed refinement of MS– DRG 014 to account for severity of illness. The commenter contended that the recipient patient population for both autologous and allogeneic transplants is similar and that recognition of the variation in the patient population for both is warranted. The commenter VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 requested a re-review of the cost variances for MS–DRG 014 because allogeneic transplant patients are often treated for similar comorbidities as autologous transplant patients prior to transplant and during post transplant care. Response: As we outlined in the proposed rule (76 FR 25819), to warrant creation of a CC or MCC subgroup within a base MS–DRG, the subgroup must meet all of the five criteria. MS– DRG 014 did not meet the criteria for possible subdivision because at least 500 cases were not in the CC or MCC subgroup. After consideration of the public comments we received, we are finalizing our proposal to delete MS– DRG 015 and to create two new MS– DRGs: MS–DRG 016 (Autologous Bone Marrow Transplant with CC/MCC); and MS–DRG 017 (Autologous Bone Marrow Transplant without CC/MCC). We note that we have amended the final titles of new MS–DRGs 015 and 016 to place ‘‘CC’’ before ‘‘MCC.’’ 2. MDC 1 (Diseases and Disorders of the Nervous System): Rechargeable Dual Array Deep Brain Stimulation System We received a public comment in response to the FY 2011 IPPS/LTCH PPS proposed rule regarding the MS– DRG assignment for rechargeable dual array deep brain neurostimulators. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50128), we indicated that we considered this comment outside of the scope of the proposed rule as we did not propose any changes for these procedures for FY 2011. However, we addressed this issue in the FY 2012 IPPS/LTCH PPS proposed rule. Deep brain stimulation is a surgical treatment that involves the implantation of a neurostimulator, used in the treatment of essential tremor, Parkinson’s disease, dystonia, and chronic pain. The commenter PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 1,338 1,092 246 Average length of stay 18.8 19.7 14.6 Average costs $38,608 40,974 28,105 recommended that CMS assign the combination of procedure codes representing rechargeable systems for deep brain stimulation therapy, procedure code 02.93 (Implantation or replacement of intracranial neurostimulator lead(s)) and procedure code 86.98 (Insertion or replacement of dual array rechargeable neurostimulator pulse generator) to MS–DRG 023 (Craniotomy with Major Device Implant/Acute Complex CNS PDX with MCC or Chemo Implant) and MS–DRG 024 (Craniotomy with Major Device Implant/Acute Complex CNS PDX without MCC). The commenter stated that this recommendation would allow all full system dual array deep brain stimulation cases to be appropriately grouped to the same MS–DRGs. Currently, procedure codes 02.93 and 86.98 are assigned to MS–DRG 025 (Craniotomy and Endovascular Intracranial Procedures with MCC), MS– DRG 026 (Craniotomy and Endovascular Intracranial Procedures with CC), and MS–DRG 027 (Craniotomy and Endovascular Intracranial Procedures without CC/MCC), while the procedure codes for the nonrechargeable dual array systems, procedure codes 02.93 and 86.95 (Insertion or replacement of dual array neurostimulator pulse generator, not specified as rechargeable), are already assigned to MS–DRGs 023 and 024. The commenter stated that the procedures to implant the rechargeable and nonrechargeable dual array systems are similar clinically as well as comparable in resource utilization. For the FY 2012 IPPS/LTCH PPS proposed rule, we analyzed FY 2010 MedPAR data and found a total of 16 full system rechargeable dual array deep brain stimulation systems reported with procedure codes 02.93 and 86.98 assigned to MS–DRGs 025 through 027. We found one case assigned to MS–DRG 025 and one case assigned to MS–DRG E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 026. The majority of the cases, 14, were assigned to MS–DRG 027, with average costs of approximately $23,870 and an average length of stay of approximately 2.2 days. We found that the deep brain stimulation cases assigned to MS–DRG 027 had higher average costs than the overall cases assigned to MS–DRG 027 of approximately $14,200. However, the average length of stay was shorter for these cases than the overall length of stay for MS–DRG 027 cases of approximately 3.7 days. We also examined the data for the nonrechargeable dual array systems to assess the commenter’s assumption that both the rechargeable and nonrechargeable dual array systems are similar in resource use. We found 155 total nonrechargeable dual array systems (procedure codes 02.93 and 86.95) assigned to MS–DRGs 023 and 024. There were 5 cases assigned to MS– DRG 023, with average costs of approximately $36,159 and an average length of stay of approximately 10 days. We found that the majority of the cases, 150, were assigned to MS–DRG 024, with average costs of approximately $25,855 and an average length of stay of approximately 2.2 days. We believe that these data support the commenter’s statement that, for the majority of these cases, the resource use is similar for both systems. For comparison purposes, if we proposed the changes that the commenter suggested, those deep brain stimulation cases currently assigned to MS–DRG 027 and the one case assigned to MS–DRG 026 (with average costs of approximately $27, 836) would be reassigned to MS–DRG 024. The average costs of approximately $23,870 of these deep brain stimulation cases assigned to MS–DRG 027 are similar to the overall average costs of approximately $23,249 for MS–DRG 024. The one case assigned to MS–DRG 025 (with average costs of approximately $29,361) would be reassigned to MS–DRG 023 (with average costs of approximately $34,168). The following table illustrates our findings: Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with RULES2 MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 023—All cases ........................................................................................................................ 023—Cases with codes 02.93 and 86.95 ............................................................................... 024—All cases ........................................................................................................................ 024—Cases with codes 02.93 and 86.95 ............................................................................... 025—All cases ........................................................................................................................ 025—Cases with codes 02.93 and 86.98 ............................................................................... 026—All cases ........................................................................................................................ 026—Cases with codes 02.93 and 86.98 ............................................................................... 027—All cases ........................................................................................................................ 027—Cases with codes 02.93 and 86.98 ............................................................................... Based on our findings, in the proposed rule, we indicated that we believe that the data support reassigning the combination of procedure codes representing rechargeable systems for deep brain stimulation therapy, code 02.93 and code 86.98, to MS–DRGs 023 and 024. Our clinical advisors support this reassignment. Therefore, we proposed to assign rechargeable dual array systems for deep brain stimulation cases identified by reporting both procedure codes 02.93 and 86.98 to MS– DRGs 023 and 024 for FY 2012. We invited public comment on our proposal to assign these cases to MS–DRG 023 and 024 for FY 2012. Comment: Several commenters supported our proposal to reassign rechargeable dual array deep brain stimulation cases. Response: We appreciate the support of the commenters. As stated above, we believe that the assignment of these cases to MS–DRG 023 and 024 is appropriate. After consideration of public comments we received, we are adopting as final our proposal to assign rechargeable dual array systems for deep brain stimulation cases identified by reporting both procedure codes 02.93 and 86.98 to MS–DRGs 023 and 024 for FY 2012. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 3. MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth, and Throat): Skull Based Surgeries We received a request from a commenter recommending that CMS reclassify skull-based surgical procedures that are currently assigned to MS–DRGs 135 and 136 (Sinus and Mastoid Procedures with CC/MCC and without CC/MCC, respectively) and reassign them to MS–DRGs 025, 026, and 027 (Craniotomy and Endovascular Intracranial Procedures with MCC, with CC, and without CC/MCC, respectively). The commenter stated that the current MS–DRG assignment does not reflect the resource utilization and technical complexity of these difficult procedures when performed for anterior skull base tumors. Skull (or cranial) based surgery is performed for a variety of serious medical conditions including esthesioneuroblastomas, which are rare, malignant tumors that arise from the epithelium overlying the olfactory bulb; sinonasal melanomas, which are malignant melanomas that may develop in the mucosa of the nose and sinuses; and sinonasal undifferentiated carcinomas, which are rapidly growing malignant tumors arising in the nasal cavity and/or sinuses. These types of PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 51527 4,238 5 1,592 150 11,505 1 9,782 1 10,936 14 Average length of stay 11.8 10.0 7.6 2.2 11.0 2.0 7.0 3.0 3.7 2.2 Average costs $34,168 36,159 23, 249 25,855 29,524 29, 361 19,125 27,836 14,200 23,870 conditions are generally identified by the following ICD–9–CM diagnosis codes: • 160.0 (Malignant neoplasm of nasal cavities) • 160.1 (Malignant neoplasm of auditory tube, middle ear, and mastoid air cells) • 160.2 (Malignant neoplasm of maxillary sinus) • 160.3 (Malignant neoplasm of ethmoidal sinus) • 160.4 (Malignant neoplasm of frontal sinus) • 160.5 (Malignant neoplasm of sphenoidal sinus) • 160.8 (Malignant neoplasm of other accessory sinuses) • 160.9 (Malignant neoplasm of accessory sinus, unspecified) • 210.7 (Benign neoplasm of nasopharynx) • 212.0 (Benign neoplasm of nasal cavities, middle ear, and accessory sinuses) According to the commenter, procedure code 22.63 (Ethmoidectomy) describes the type of surgery being performed for these patients and is currently assigned to MS–DRGs 135 and 136. For the FY 2012 IPPS/LTCH PPS proposed rule, using the FY 2010 MedPAR file, we examined data on E:\FR\FM\18AUR2.SGM 18AUR2 51528 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations cases identified by procedure code 22.63 when reported with one of the above listed diagnosis codes in MS– DRGs 135 and 136. We found a total of 402 cases in MS–DRG 135 with an average length of stay of 6.30 days and average costs of $12,869. We found only 23 cases in MS–DRG 135 identified by procedure code 22.63 with one of the diagnosis codes listed above with an average length of stay of 3.96 days and average costs of $10,510. In MS–DRG 136, there were a total of 320 cases with an average length of stay of 2.36 days and average costs of $6,683. We found only 27 cases in MS–DRG 136 identified by procedure code 22.63 with one of the diagnosis codes listed above with an average length of stay of 2.04 days and average costs of $6,844. As shown in the table below, the cases reporting procedure code 22.63 in MS–DRGs 135 and 136 have a lower volume, a shorter length of stay, and primarily lower average costs compared to all cases in MS–DRGs 135 and 136. As we indicated in the proposed rule, the data demonstrated that these cases are appropriately assigned to their current MS–DRG classifications. Number of cases MS–DRG MS–DRG 135—All cases ........................................................................................................................ MS— DRG 135—Cases with procedure code 22.63 and diagnosis code 160.0 through 160.9 or 210.7 or 212.0 ...................................................................................................................................... MS–DRG 136—All cases ........................................................................................................................ MS–DRG 136—Cases with procedure code 22.63 and diagnosis code 160.0 through 160.9 or 210.7 or 212.0 ................................................................................................................................................ We also analyzed claims data for MS– DRGs 25 through 27. We determined that if the cases identified by procedure code 22.63 were to be reassigned to MS– DRGs 25–27, they would be significantly overpaid. As shown in the MS–DRG 025—All cases ........................................................................................................................ MS–DRG 026—All cases ........................................................................................................................ MS–DRG 027—All cases ........................................................................................................................ mstockstill on DSK4VPTVN1PROD with RULES2 4. MDC 5 (Diseases and Disorders of the Circulatory System) a. Percutaneous Mitral Valve Repair With Implant Procedure code 35.97 (Percutaneous mitral valve repair with implant) was created for use beginning October 1, 2010 (FY 2011) after the concept of a percutaneous valve repair was VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00054 402 6.30 $12,869 23 320 3.96 2.36 10,510 6,683 27 2.04 6,844 Number of cases presented and approved at the February 2010 ICD–9–CM Coordination and Maintenance Committee Meeting. Procedure code 35.97 was created at that time to describe the MitraClipTM device and any other percutaneous mitral valve repair devices currently on the market. This procedure code is assigned to the following MS–DRGs: 231 and 232 (Coronary Bypass with PTCA with MCC and without MCC, respectively); 246 (Percutaneous Cardiovascular Procedure with DrugEluting Stent with MCC or 4+ Vessels/ Stents); 247 (Percutaneous Cardiovascular Procedure with DrugEluting Stent without MCC); 248 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents); 249 (Percutaneous Cardiovascular Procedure with NonDrug-Eluting Stent without MCC); 250 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent or AMI with MCC); and 251 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent or AMI without MCC). According to the Food and Drug Administration’s (FDA’s) terms of the clinical trial for MitraClipTM, the device is to be implanted in patients without any additional surgeries performed. Therefore, based on these terms, we Fmt 4701 Sfmt 4700 Average costs table below, we found that the average costs for these MS–DRGs range from $14,200 to $29,524. MS–DRG In summary, we indicated in the proposed rule that the data did not support moving cases with procedure code 22.63 when reported with one of the previously listed diagnosis codes from MS–DRGs 135 and 136 to MS– DRGs 25, 26 and 27. We invited public comment on our proposal not to make any MS–DRG modifications for these codes for FY 2012. Comment: Several commenters supported our proposal to not make any revisions to reclassify skull-based surgical procedures that are currently assigned to MS–DRGs 135 and 136 and reassign them to MS–DRGs 025, 026, and 027. Response: We appreciate the commenters’ support. After consideration of the public comment we received, we are finalizing our proposal to not make any modifications for skull-based surgeries for FY 2012. Average length of stay 11,505 9,782 10,936 Average length of stay 10.95 7.00 3.71 Average costs $29,524 19,125 14,200 believe that the most likely MS–DRG assignments would be MS–DRGs 250 and 251, as described above. However, because procedure code 35.97 has only been in use since October 1, 2010, there are no claims data in the most recent MedPAR update file with which to evaluate any alternative MS–DRG assignments. Therefore, we did not propose to make any MS–DRG changes for procedure code 35.97 for FY 2012. We proposed to keep procedure code 35.97 in its current MS–DRG assignments. We invited public comment on this proposal. Comment: Several commenters addressed our proposal. One commenter supported our proposal not to make any MS–DRG changes in the current assignment of procedure code 35.97, but also recommended that CMS review the MS–DRG assignment for FY 2013 when more claims data become available. In addition, one commenter indicated that it ‘‘* * * has no objections to CMS’ proposed changes to the MS–DRG classifications and the Medicare Code Editor, which seem reasonable, given the data and information provided.’’ Response: We appreciate the commenters’ support and suggestion. After consideration of the public comments we received, we are adopting as final without modification our E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations proposal to keep procedure code 35.97 (Percutaneous mitral valve repair with implant) in its current MS–DRG assignments of 231 and 232 (Coronary Bypass with PTCA with MCC and without MCC, respectively); 246 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with MCC or 4+ Vessels/Stents); 247 (Percutaneous Cardiovascular Procedure with DrugEluting Stent without MCC); 248 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents); 249 (Percutaneous Cardiovascular Procedure with NonDrug-Eluting Stent without MCC); 250 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent or AMI with MCC); and 251 (Percutaneous Cardiovascular Procedure without Coronary Artery Stent or AMI without MCC). In addition, we plan to conduct a review of the MedPAR data for code 35.97 in our next annual IPPS update cycle (that is, for FY 2013) to determine if the MS–DRG assignments as listed above are the most appropriate MS– DRGs for this procedure. b. Aneurysm Repair Procedure Codes Thoracic aorta defects, such as aneurysm, dissection, or injury, are uncommon but serious conditions that may arise from a disease or an accident. Some patients can be medically managed but most are treated with surgery. Often these defects result in death if they are not diagnosed and treated promptly. Currently, there are two techniques used for repair of aortic defects; both are O.R. procedures performed in an inpatient hospital setting. These two procedures are described by ICD–9–CM procedure codes 38.45 (Resection of vessel with replacement, thoracic vessel) and 39.73 (Endovascular implantation of graft in thoracic aorta). Both procedure codes 38.45 and 39.73 are currently assigned to MS–DRGs 237 (Major Cardiovascular Procedures with MCC or Thoracic Aortic Aneurysm Repair) and 238 (Major Cardiovascular Procedures without MCC). We received a request that we consider the reassignment of procedure codes 38.45 and 39.73 within the MS– DRG structure by removing the procedure codes from MS–DRGs 237 and 238 and adding them to a more clinically coherent set of MS–DRGs reflecting higher resource consumption. The requestors believed that, based on their analysis of MedPAR claims data of MS–DRGs 237 and 238, the resource utilization of both the endovascular and open repairs of the abdominal and thoracic aortas are higher than the overall average resource utilization for the MS–DRGs to which these procedures are currently assigned. The requestors also believed that an unusually high number of cases probably fall into cost outlier status. For the FY 2012 IPPS/LTCH PPS proposed rule, we reviewed the MedPAR claims data for these two procedure codes. Our findings are shown in the following two tables. Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 237—All cases ........................................................................................................................ 237—Cases with procedure code 39.73 ................................................................................ 237—Cases without procedure code 39.73 ........................................................................... 238—All cases ........................................................................................................................ 238—Cases with procedure code 39.73 ................................................................................ 238—Cases without procedure code 39.73 ........................................................................... 237—All cases ........................................................................................................................ 237—Cases with procedure code 38.45 ................................................................................ 237—Cases without procedure code 38.45 ........................................................................... 238—All cases ........................................................................................................................ 238—Cases with procedure code 38.45 ................................................................................ 238—Cases without procedure code 38.45 ........................................................................... mstockstill on DSK4VPTVN1PROD with RULES2 Our findings of the analysis of the cases with procedure code 39.73 showed that the average costs are substantially higher than those costs for the cases overall in both MS–DRGs 237 and 238. We found that the average length of stay for the 1,851 cases identified in MS–DRG 237 is somewhat lower at 7.73 days than the average length of stay of 10.26 days in cases not containing procedure code 39.73. Our findings of the analysis of the cases with procedure code 38.45 showed that both the average costs and the average length of stay are considerably higher than the average costs and the average length of stay for those cases without procedure code 38.45. In addition, we reviewed the cases in which both procedure codes 38.45 and 39.73 were documented during the same Number of cases 237—All cases ........................................................................................................................ 237—Cases with procedure code 39.73 and without procedure code 38.45 ........................ 237—Cases with procedure code 38.45 and without procedure code 39.73 ........................ 238—All cases ........................................................................................................................ VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00055 20,680 448 20,234 35,705 466 35,239 Fmt 4701 Sfmt 4700 Average length of stay 10.03 7.73 10.26 4.08 0 4.08 Average length of stay 10.03 13.29 9.96 4.08 7.29 4.03 Average costs $34,268 41,033 33,603 20,597 0 20,597 Average costs $34,268 51,953 33,878 20,597 30,219 20,465 admission. As can be seen in the charts below, we found 22 cases in which both procedure codes 38.45 and 39.73 were reported. Therefore, the sum of the values in the next two charts below will differ from the charts above because the cases containing both procedure codes have been removed and the data have been reworked. MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 20,680 1,851 18,829 35,705 0 35,705 Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 51529 E:\FR\FM\18AUR2.SGM 20,680 1,829 424 35,705 18AUR2 Average length of stay 10.03 7.68 13.36 4.08 Average costs $34,268 40,862 51,783 20,597 51530 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Number of cases MS–DRG MS–DRG 238—Cases with procedure code 39.73 and without procedure code 38.45 ........................ MS–DRG 238—Cases with procedure code 38.45 and without procedure code 39.73 ........................ Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 237—All cases ........................................................................................................................ 237—Cases with procedure code 38.45 and with procedure code 39.73 ............................. 237—Cases without procedure code 38.45 or procedure code 39.73 .................................. 238—All cases ........................................................................................................................ 238—Cases with procedure code 38.45 and with procedure code 39.73 ............................. 238—Cases without procedure code 38.45 or procedure code 39.73 .................................. We found in our analysis of the claims data for cases with both procedure codes 38.45 and 39.73 that the average costs are substantially higher than those costs for the cases overall in MS–DRG 237. In addition, we found that the average length of stay for the 22 cases with both procedure codes 38.45 and 39.73 is higher at 11.86 days than the average length of stay of 10.03 days for all cases in MS–DRG 237. Our analysis of the claims data for the procedure codes in MDC 5 showed that procedure code 38.45 is also assigned to MS–DRGs 228 (Other Cardiothoracic Procedures with MCC), 229 (Other Cardiothoracic Procedures with CC), and 230 (Other Cardiothoracic Procedures without CC/MCC) when it occurs in combination with procedure code 38.44 (Resection of vessel with replacement, aorta, abdominal). Procedure code 39.73 is not assigned to MS–DRGs 228 through 230, and review of the data showed that there were no Number of cases MS–DRG 228—All cases ........................................................................................................................ MS–DRG 228—Cases with procedure code 38.45 and procedure code 38.44 ..................................... MS–DRG 228—Cases without procedure code 38.45 and without procedure code 38.44 ................... MS–DRG 229—All cases ........................................................................................................................ MS–DRG 229—Cases with procedure code 38.45 and procedure code 38.44 ..................................... MS–DRG 229—Cases without procedure code 38.45 and without procedure code 38.44 ................... MS–DRG 230—All cases ........................................................................................................................ MS–DRG–230—Cases with procedure code 38.45 and procedure code 38.44 .................................... MS–DRG 230—Cases without procedure code 38.45 and without procedure code 38.44 ................... DRGs 237 and 238 and the 912 cases containing procedure code 38.45 in MS– DRGs 237 and 238 to determine if they would meet the established criteria for a 3-way severity of illness split. This criterion is described in section III.G.1.c. of this preamble. The chart below shows our findings, with MS–DRG 237 acting mstockstill on DSK4VPTVN1PROD with RULES2 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00056 2,084 276 1,808 2,354 157 2,197 628 34 594 Number of cases 237–1—All cases .................................................................................................................... 237–1—Cases with procedure code 39.73 ............................................................................ 237–1—Cases with procedure code 38.45 ............................................................................ 237–2—All cases .................................................................................................................... 237–2—Cases with procedure code 39.73 ............................................................................ 237–2—Cases with procedure code 38.45 ............................................................................ 237–3—All cases .................................................................................................................... 237–3—Cases with procedure code 39.73 ............................................................................ 237–3—Cases with procedure code 38.45 ............................................................................ VerDate Mar<15>2010 Fmt 4701 Sfmt 4700 Average length of stay 10.03 11.86 10.19 4.08 0 4.03 0 30,219 Average costs $34,268 55,243 33,184 20,597 0 20,465 Average length of stay 13.79 15.18 13.58 8.31 10.68 8.14 5.45 7.18 5.35 Average costs $49,488 56,246 48,456 31,148 37,723 30,678 24,236 27,054 24,075 as a severity of illness proxy for all cases, as there were no cases in MS– DRG 238. In the chart, the extensions ‘‘–1,’’ ‘‘–2,’’ and ‘‘–3’’ correspond to severity levels, with ‘‘–1’’ representing cases with MCC, ‘‘–2’’ representing cases with CC, and ‘‘–3’’ representing cases without CC/MCC. MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 20,680 22 18,405 35,705 0 35,239 0 7.29 Average costs cases that had been reported in these MS–DRGs. The table below shows our findings of the average costs and the average length of stay for procedure code 38.45 reported in combination with procedure code 38.44 in MS–DRGs 228 through 230 and the average costs and the average length of stay in all cases in MS–DRGs 228 through 230 when both procedure codes 38.45 and 38.44 are not assigned. MS–DRG Our findings show that both the average length of stay and average costs are higher in those cases containing procedure code 38.45 than those cases without this procedure code in MS– DRGs 228 through 230. We then analyzed the 1,851 cases containing procedure code 39.73 in MS– 0 466 Average length of stay E:\FR\FM\18AUR2.SGM 20,680 637 446 17,356 659 353 18,349 555 113 18AUR2 Average length of stay 10.03 12.14 13.29 5.73 6.89 8.14 2.52 3.65 6.30 Average costs $34,268 57,834 51,954 22,083 38,673 31,480 19,183 27,993 26,280 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Our next step was to analyze the claims data for the cases in the clinically coherent MS–DRGs to which we proposed to move these cases. These six MS–DRGs are: 216 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC); 217 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with CC); 218 (Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization without CC/MCC); 219 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC), 220 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with CC); and 221 (Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization without CC/ MCC). For the sake of the grouping algorithm, procedure codes 39.73 and 38.45 must also be added to MS–DRGs 216 through 219. However, if these codes are documented in cases in which a cardiac catheterization occurs, they will be ‘‘trumped’’ by those catheterizations. Therefore, when we reviewed the data in order to make length of stay and cost comparisons, we only used the three MS–DRGs to which procedure codes 39.73 and 38.45 would appear without cardiac catheterization; that is MS–DRGs 219, 220, and 221. Our findings describing these three MS– DRGs are displayed in the following chart: Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with RULES2 MS–DRG 219 .......................................................................................................................................... MS–DRG 220 .......................................................................................................................................... MS–DRG 221 .......................................................................................................................................... Our evaluation of the severity levels in the cases containing procedure codes 39.73 and 38.45 using the proxy MS– DRGs 237–1, 237–2, and 237–3 compared to the claims data in the table above with MS–DRGs 219 through 221 demonstrates that the cases are similar in resource consumption. In addition, the cases are clinically coherent. We indicated in the proposed rule that, by moving procedure code 38.45 to MS–DRGs 216 through 221, we did not believe that there is a need for combination codes 38.45 plus 38.44 to be specifically assigned to MS–DRGs 228, 229, and 230. Because MS–DRGs 216 through 221 are higher in the surgical hierarchy for MDC 5 than MS– DRGs 228 through 230, the result of the proposal would be that either procedure code 38.45 by itself or in combination with procedure code 38.44 will always be assigned to MS–DRGs 216 through 221. We indicated that when reported alone, under this policy, procedure code 38.44 would continue to be assigned to MS–DRGs 237 and 238, as it has been in the past. Therefore, for FY 2012, we proposed to remove procedure codes 38.45 and 39.73 from MS–DRGs 237 and 238 and to add these codes to MS–DRGs 216, 217, 218, 219, 220, and 221 based on our findings of similar resource consumption and clinical coherence. To conform to this proposed change, we also proposed to revise the title of MS– DRG 237 (Major Cardiovascular Procedures with MCC or Thoracic Aortic Aneurysm Repair) by removing the terms ‘‘or Thoracic Aortic Aneurysm Repair.’’ Therefore, the new proposed title of MS–DRG 237 was ‘‘Major Cardiovascular Procedures with MCC.’’ We invited public comment on these proposals. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Comment: Several commenters supported the proposed changes. Response: We appreciate the commenters’ support. Therefore, as we proposed, we are adopting our proposed changes as final. In summary, we are removing procedure codes 38.45 and 39.73 from MS–DRGs 237 and 238 and adding these two codes to the following six MS–DRGs: 216; 217; 218; 219; 220; and 221. In addition, we are revising the title of MS–DRG 237 to read ‘‘Major Cardiovascular Procedures with MCC.’’ The title of MS–DRG 238 (Major Cardiovascular Procedures without MCC) will remain the same. 5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue) a. Artificial Discs In response to the FY 2011 IPPS/ LTCH PPS proposed rule, we received a public comment that was outside of the scope of any proposal in that proposed rule. The commenter urged CMS to reassign procedure code 84.62 (Insertion of total spinal disc prosthesis, cervical) from MS–DRG 490 (Back and Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/ Neurostimulator) into MS–DRGs 471 through 473 (Cervical Spinal Fusion with MCC, with CC, and without CC/ MCC, respectively). In addition, the commenter requested that CMS reassign procedure code 84.65 (Insertion of total spinal disc prosthesis, lumbosacral) from MS–DRG 490 (Back and Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/ Neurostimulator) to MS–DRGs 459 and 460 (Spinal Fusion Except Cervical with MCC and without MCC, respectively). However, the commenter also provided an alternative option to reassigning the PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 51531 12,805 15,988 4,043 Average length of stay 12.76 7.65 5.90 Average costs $51,399 34,270 28,974 procedure codes to different MS–DRGs. The commenter suggested the creation of a new, separate MS–DRG for the two artificial disc procedures if reassignment to the fusion MS–DRGs was not feasible. We refer the reader to the FY 2008 IPPS proposed rule and final rule with comment period (72 FR 24731 through 24735 and 47226 through 47232) for discussion on the comprehensive evaluation of all the spinal DRGs in the development of the MS–DRG classification system. The modifications made to the spinal DRGs for FY 2008 recognized the similar utilization of resources, differences in levels of severity, and the complexity of the services being performed on patients undergoing the various types of spinal procedures. For the FY 2012 IPPS/LTCH PPS proposed rule, we analyzed FY 2010 MedPAR claims data for procedure codes 84.62 and 84.65 in MS–DRG 490 and compared those results to the claims data for MS–DRGs 459, 460, 471, 472, and 473. We found a total of 19,840 cases in MS–DRG 490 with an average length of stay of 4.24 days and average costs of $11,940. As displayed in the chart below, we found 97 cases reporting procedure code 84.62, with an average length of stay of 1.80 days and average costs of $13,194 in MS–DRG 490. We also found 35 cases reporting procedure code 84.65, with an average length of stay of 2.91 days and average costs of $20,753. While average costs for the artificial disc cases were slightly higher ($1,254 for procedure code 84.62 and $8,813 for procedure code 84.65) compared to the average cost for all cases in MS–DRG 490, the artificial disc cases were of extremely low volume and reflected shorter lengths of stay E:\FR\FM\18AUR2.SGM 18AUR2 51532 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations compared to all the cases in MS–DRG 490. Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with RULES2 MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 459—All cases ........................................................................................................................ 460—All cases ........................................................................................................................ 471—All cases ........................................................................................................................ 472—All cases ........................................................................................................................ 473—All cases ........................................................................................................................ 490—All cases ........................................................................................................................ 490—Cases with code 84.62 .................................................................................................. 490—Cases with code 84.65 .................................................................................................. We recognized the disparity in average costs for cases reporting the insertion of a cervical or lumbar artificial disc in MS–DRG 490 compared to all the cases in that MS–DRG. However, we did not believe this supports reassignment of procedure codes 84.62 and 84.65 to the MS–DRGs for spinal fusion as the commenter requested. Even with the disparity in costs, clinically, the insertion of an artificial disc is not a spinal fusion. Therefore, reassignment of the artificial disc cases to the fusion MS–DRGs would be clinically inappropriate. In addition, for certain Medicare populations, the insertion of an artificial disc is considered a noncovered procedure. As stated earlier, the commenter also provided an alternative option to reassigning procedure codes 84.62 and 84.65. The commenter suggested the creation of a new, separate MS–DRG for the two artificial disc procedures if reassignment to the fusion MS–DRGs was not feasible. In our evaluation of the claims data and as shown above in the data chart, the artificial disc cases are of extremely low volume; therefore, we do not believe the findings warrant the creation of a separate MS–DRG. We invited public comment on our proposal not to reassign procedure code 84.62 from MS–DRG 490 to MS–DRGs 471 through 473 and procedure code 84.65 from MS–DRG 490 to MS–DRGs 459 and 460. We also invited public comment on our proposal not to create a new, separate MS–DRG for artificial disc procedures (codes 84.62 and 84.65) for FY 2012. Comment: Several commenters supported our proposal not to create a new MS–DRG for artificial disc procedures, as well as not to reassign the procedure codes for insertion of a cervical or lumbar artificial disc (codes 84.62 and 84.65) to the fusion MS–DRGs (459 and 460 and 471 through 473). One commenter agreed with our statement that the insertion of an artificial disc is not the same as a fusion and should not VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 be included in the fusion MS–DRGs. Another commenter agreed that reassignment of the artificial discs to the fusion MS–DRGs does not appear to be a clinically appropriate classification despite comparative costs. This commenter believed that limitations in the data, such as the low volume of cases, may be due to artificial discs being a noncovered procedure for certain Medicare populations and recommended revisiting our analysis for a new separate MS–DRG if the coverage policy is revised in the future. Response: We appreciate the commenters’ support for our proposals. We also acknowledge the commenters recommendation to conduct further analysis for total disc replacement procedures should the coverage policy pertaining to certain Medicare populations be modified in the future. Comment: One commenter expressed appreciation to CMS for reviewing the current MS–DRG assignment for total disc replacement (TDR) procedures involving the cervical and lumbar areas. However, the commenter disagreed with the proposed rule analysis, stating it was limited to only the MedPAR database. The commenter believed that information from two publicly available databases, the Healthcare Cost and Utilization Project (HCUP) database and the California Patient Discharge database, support modifications to the TDR procedures. According to the commenter, ‘‘CMS’ current MS–DRG assignment and resulting reimbursement at thirty to fifty percent (30–50%) of fusion procedures is well below the average eighty-eight percent (88%) ratio of TDR to fusion charges observed in the two additional databases analyzed.’’ The commenter acknowledged that procedure code 84.62 and procedure code 84.65 are currently assigned to MS–DRG 490, regardless of whether or not the patient has a CC or MCC. The commenter also acknowledged the evaluation of the spinal procedure MS– DRGs in the FY 2008 IPPS proposed and PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 3,650 60,865 2,686 8,586 24,323 19,840 97 35 Average length of stay 8.92 3.75 8.92 3.78 1.80 4.24 1.80 2.91 Average costs $40,218 25,268 29,837 18,494 13,775 11,940 13,194 20,753 final rules (72 FR 24731 through 24735 and 47226 through 47232), respectively. However, according to the commenter, the MS–DRG assignment for TDR procedures requires a more recent and thorough evaluation. The commenter provided a comparison of how TDR procedures differ from other procedures assigned to MS–DRG 490. The commenter also stated that TDR procedures are more complex than other procedures in the MS–DRG. For example, the commenter noted that MS–DRG 490 includes procedure codes 84.58 and 84.59, representing spinal disc devices such as the X–Stop, Coflex, Dynesys, and M– Brace which do not involve removal of a disc. The commenter also noted that procedure code 80.51 (Excision of intervertebral disc), which comprises only one aspect of the total surgery required for TDR, is assigned to the same MS–DRG. The commenter further noted that because the two procedures are in the same MS–DRG, the hospital payment is the same for both procedures. In addition, the commenter included a comparison of TDR cases and fusion cases, noting that there appeared to be greater similarity in resource use between fusion and TDR procedures than between TDR and other procedures in MS–DRG 490. The commenter reported that TDR is an alternative treatment option to spinal fusion and that patients receiving TDR have the same diagnosis as those receiving spinal fusion. In terms of similarity, the commenter stated that during both a TDR and spinal fusion surgery, the affected disc is removed, allowing normal disc height to be restored by the use of an implant. In spinal fusion, stability of the spinal segment is accomplished by the use of an implant and instrumentation such as plates, rods or screws and use of bone graft promotes osseous fusion of the vertebrae. For TDR procedures, an implant that allows motion is inserted into the disc space. According to the E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations commenter, these factors demonstrate clinical homogeneity and resource utilization for both TDR and spinal fusion. The commenter did not dispute our findings that TDR procedures have shorter lengths of stay and are higher in costs compared to other procedures within MS–DRG 490. The commenter also acknowledged that TDR procedures are low volume and represent a fraction of all the procedures assigned to the MS–DRG. Response: We appreciate and acknowledge the commenter’s provision of data related to the HCUP database and the California Patient Discharge database. However, we point out that the commenter failed to identify the data related to each specified type of artificial disc replacement procedure in its analysis. We do not consider the data to be reliable for purposes of determining MS–DRG reclassifications in the form provided, as the data do not identify the number of cases, average length of stay, or average costs associated with a cervical versus a lumbar disc replacement. Further, in its own submitted comments, the commenter notes that the data provided were based on charges, not costs. In addition, as stated in the FY 2012 IPPS proposed rule (76 FR 25800), in order for us to consider using particular nonMedPAR data, we must have sufficient time to evaluate and test the data. This allows us time to test the data and make a preliminary assessment as to the feasibility of using the data. We evaluate patient care costs using average charges and lengths of stay as proxies for costs and rely on the judgment of our medical advisors to decide whether patients are clinically distinct or similar to other patients in the MS–DRG. We also consider variations and whether observed average differences are consistent across patients or attributable to cases that were extreme in terms of charges, length of stay, or both. Lastly, we consider the number of patients who will have a given set of characteristics and generally prefer not to create a new MS–DRG unless it would include a substantial number of cases. In response to the commenter’s comparison of how TDR procedures differ from other procedures in MS– DRG 490, we point out that procedure code 84.58 (Implantation of interspinous process decompression device), which previously identified the X–Stop device, was deleted effective October 1, 2007 (FY 2008). In addition, the other spinal disc devices that were noted by the commenter (Coflex, Dynesys, and M–Brace) were reassigned from procedure code 84.59 (Insertion of other spinal devices) to unique codes that were created in response to industry requests to describe a newer category of devices identified as motion preserving technologies. This new procedure code category, 84.8 (Insertion, replacement and revision of posterior spinal motion preservation device(s)), also became effective as of October 1, 2007 (FY 2008). As discussed above, the commenter recommended that CMS conduct a more recent and thorough evaluation of the spinal procedures in MS–DRG 490. However, in its own submitted comments, the commenter referred to outdated, deleted codes for its comparison to TDR. With regard to clinical homogeneity and resource utilization, spinal fusion, TDR and a subset of the motion preserving technologies utilizing implant devices that allow motion in the spinal column were discussed extensively as noted above in the FY 2008 IPPS proposed rule and final rule with comment period (72 FR 24731 through 24735 and 47226 through 47232), respectively. We will continue to evaluate the MS– DRGs on an annual basis and to respond to requests for code reassignments and MS–DRG reclassifications. We performed an analysis of the cervical and lumbar artificial disc replacement procedures in comparison to the fusion MS–DRGs in response to the commenter’s request, as described above. Our data did not support reassignment of the artificial disc replacement codes, nor did our clinical advisors agree that these procedures are clinically coherent to be grouped in the same MS–DRGs. In addition, the data did not support the creation of a new, separate MS–DRG for total disc replacement procedures. As mentioned previously, we performed a comprehensive analysis of all the spinal DRGs in our FY 2008 rulemaking process and we recognized the costs of procedures involving insertion of a disc device. As a result, we modified MS–DRG 490 (the higher severity level) to include those procedures with disc devices. The data analysis conducted at that time supported that modification. We will continue to monitor the resource utilization of procedure codes 84.62 and 84.65 to determine if future MS–DRG reassignments are warranted. After consideration of the public comments we received, we are finalizing our proposal to not create a new, separate MS–DRG for cervical or lumbar total disc replacement procedures and to not reassign procedure code 84.62 from MS–DRG 490 to MS–DRGs 471 through 473 and procedure code 84.65 from MS–DRG 490 to MS–DRGs 459 and 460 for FY 2012. b. Major Joint Replacement or Reattachment of Lower Extremities We received a request to add an additional severity level for MS–DRG 469 (Major Joint Replacement or Reattachment of Lower Extremity with MCC) and MS–DRG 470 Major Joint Replacement or Reattachment of Lower Extremity without MCC). For the FY 2012 IPPS/LTCH PPS proposed rule, we examined FY 2010 MedPAR claims data to determine if we could subdivide the base MS–DRG into three severity levels: with MCC, with CC, and without CC/ MCC. We applied the criteria used in the development of the MS–DRGs included in the FY 2008 IPPS final rule with comment period (72 FR 47169). We refer readers to this final rule with comment period for a complete description of these criteria. As discussed earlier, the original criteria were based on average charges. However, subsequent to the FY 2007 IPPS final rule (71 FR 47882), we now use average costs. The five criteria using costs are listed below. 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 costs 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 costs between subgroups. • There is a $2,000 difference in average costs between subgroups The following table shows our determination of the number of cases and average costs by MCC, CC, and nonCC levels. Number of cases MS–DRGs 469 and 470 Cases with MCC ...................................................................................................................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 51533 E:\FR\FM\18AUR2.SGM 25,717 18AUR2 Average length of stay 7.72 Average costs $21,016 51534 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Number of cases MS–DRGs 469 and 470 Average length of stay Average costs 179,116 220,739 3.99 3.21 14,233 13,250 Total .................................................................................................................................................. mstockstill on DSK4VPTVN1PROD with RULES2 Cases with CC ......................................................................................................................................... Cases without CC/MCC ........................................................................................................................... 425,572 3.8 14,133 We determined that these cases do not meet our five criteria for adding a new severity level. The cases failed to meet criterion four (requiring at least a 20percent difference in average costs between subgroups) and criterion five (requiring a $2,000 difference in average costs between subgroups). Therefore, we did not propose the addition of a new severity level for the base MS–DRG. Instead, we proposed to maintain the two existing severity levels for MS– DRGs 469 and 470. We welcomed public comments on our proposal not to add an additional severity level to MS– DRGs 469 and 470. Comment: Several commenters supported our proposal to maintain the two existing severity levels for MS– DRGs 469 and 470 and not to add a third severity level. The commenters stated that the proposal seemed reasonable, given the data and information provided. One commenter opposed our proposal. The commenter acknowledged the five criteria used to evaluate the establishment of a new severity level and the fact that this set of MS–DRGs did not meet the criterion requiring at least a 20-percent difference in average costs between subgroups or the criterion requiring a $2,000 difference in average costs between subgroups. However, the commenter stated that the large number of ‘‘with CC’’ cases that are currently classified in the ‘‘without CC/MCC’’ group places an unfair burden on providers who treat these patients and presents a distorted picture of the actual severity level of cases assigned to those providers. The commenter believed that adding an additional severity level to MS–DRGs 469 and 470 would better identify those conditions that lead to higher severity of illness and resource use relative to the average Medicare patient. Another commenter opposed our proposal of maintaining the current two severity levels. The commenter stated that while the data appear to show that there is not a significant average cost difference between cases without CC/ MCC compared to cases with CC, the commenter believed the data are biased. The commenter believed that diagnoses that do not affect DRG assignment are less likely to be reported on claims. The VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 commenter speculated that it was reasonable to assume that, for cases assigned to these MS–DRGs, complications and comorbidities are underreported, as hospitals know that coding complications and comorbidities do not result in higher reimbursement. The commenter stated that a more reasonable approach would be to establish a third severity level for major joint replacement, with the intent of analyzing the data over the next 2 years to determine whether this was an appropriate MS–DRG modification. The commenter stated that the fact that ‘‘Revision of a Hip or Knee Replacement’’ has three levels strongly suggests that three levels would be appropriate for major joint replacement also. Response: We agree with the commenters’ statements that the data analysis shows that two of the five established criteria for creating a new severity level were not met. The cases failed to meet criterion two requiring at least a 20-percent difference in average costs between subgroups and criterion five requiring a $2,000 difference in average costs between subgroups. The criteria were developed to evaluate the need for severity levels across all MS– DRGs. We applied the criteria used in the development of the MS–DRGs included in the FY 2008 IPPS final rule with comment period (72 FR 47169). We refer readers to that final rule with comment period for a complete description of these criteria. As discussed earlier, the original criteria were based on average charges. However, subsequent to the FY 2007 IPPS final rule (71 FR 47882), we now use average costs. We believe it is important to apply these criteria consistently as requests are evaluated to create new severity levels. The cases in MS–DRGs 469 and 470 failed to meet the five criteria for adding a new severity level. We agree with the commenters who supported our proposal to maintain the two existing severity levels for MS–DRGs 469 and 470 and not creating a third severity level. We disagree with the commenters who stated that CMS should ignore the criteria and add the additional severity level. One commenter suggested that we PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 could retroactively review this new severity level by examining claims data 2 years after the update is made. We believe it is inappropriate to make an exception to the severity level criteria based on an assumption that hospitals may be under reporting secondary diagnoses that are on the CC list for certain types of cases. We encourage hospitals to code and report accurately. We will continue to review data to determine if additional severity levels are needed for specific MS–DRGs based on our published criteria. We do not believe it is appropriate to make exceptions for certain MS–DRGs. After consideration of the public comments we received, as we proposed, we are maintaining MS–DRGs 469 and 470 with the current two severity levels for FY 2012. c. Combined Anterior/Posterior Spinal Fusion A manufacturer requested that CMS reassign spinal fusion cases utilizing the AxiaLIF technology from MS–DRGs 459 and 460 (Spinal Fusion Except Cervical with MCC and without MCC, respectively) to MS–DRGs 453, 454, and 455 (Combined Anterior/Posterior Spinal Fusion with MCC, with CC, and without CC/MCC, respectively). The commenter stated that an anterior lumbar interbody spinal fusion performed with a lateral approach, the extreme lateral interbody fusion (XLIF®), with posterior spinal fixation, can report two codes resulting in assignment to the combined fusion MS– DRGs. The commenter also stated that the AxiaLIF technology, which is also utilized in an anterior lumbar interbody spinal fusion and uses a pre-sacral approach, can only report one code, resulting in assignment to the single fusion MS–DRGs. The commenter expressed concern that the payment incentives are not properly aligned for the recently available minimally invasive spinal fusion technologies. The commenter compared the XLIF® to the AxiaLIF and urged CMS to consider the AxiaLIF technology similar to the XLIF® for purposes of MS–DRG assignment. Spinal fusion is a surgical procedure that joins two or more vertebrae by the use of bone graft (or bone graft substitute), with the goal of maintaining E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations alignment, providing stability, decreasing pain, and restoring the function of the spinal nerves. Routinely, a spinal fusion also utilizes internal fixation devices (instrumentation) to assist in stabilizing the spine. These fixation devices may include pedicle screws, cages, rods, or plates. Effective October 1, 2010, ICD–9–CM procedure code 81.06 (Lumbar and lumbosacral fusion of the anterior column, anterior technique) describes the XLIF® procedure, and code 81.08 (Lumbar and lumbosacral fusion of the anterior column, posterior technique) describes the AxiaLIF technology. The spinal fusion codes and their corresponding MS–DRG assignment include the use of bone graft and internal fixation. The requestor’s comment regarding the assignment of one procedure code for one technology versus assigning two procedure codes for another technology indicates that the commenter may not fully understand the MS–DRG GROUPER logic for spinal fusions. For example, if an anterior lumbar interbody fusion is performed and posterior spinal fixation (or instrumentation) is also utilized, this requires one code and results in a single fusion MS–DRG assignment. However, if a posterior spinal fusion (procedure code 81.07 (Lumbar and lumbosacral fusion of the posterior column, posterior technique) was performed in addition to an anterior fusion, for example, the XLIF® procedure (procedure code 81.06), that scenario would necessitate the assignment of both codes, resulting in assignment to the combined spinal fusion MS–DRGs (453, 454, or 455). MS–DRGs 453, 454, and 455 were created to capture patients who have both an anterior and posterior fusion. We believe the requestor may have confused the terms ‘‘fixation’’ and ‘‘fusion’’ for MS–DRG assignment in its request. For the FY 2012 IPPS/LTCH PPS proposed rule, we analyzed the FY 2010 MedPAR data to evaluate claims reporting procedure codes 81.06, 81.07, and 81.08 in MS–DRGs 456 through 458 (Spinal Fusion Except Cervical with Spinal Curvature/Malignancy/Infection or 9+ Fusions with MCC, with CC and without CC/MCC, respectively) and MS–DRGs 459 and 460. We found a total of 1,115 cases in MS–DRG 456, with an average length of stay of 13.14 days and average costs of $63,856. We found 278 cases reporting procedure code 81.08, with an average length of stay of 12.04 days and average costs of $56,585. Similar results can be seen for procedure code 81.08 in the remaining MS–DRGs as shown in the chart below in terms of volume, length of stay, and average cost. Clearly, the data demonstrate that the AxiaLIF technology (procedure code 81.08) is appropriately assigned to its current MS–DRG assignments, as is the XLIF® procedure (procedure code 81.06). Number of cases MS–DRG mstockstill on DSK4VPTVN1PROD with RULES2 MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 456—All cases ........................................................................................................................ 456—Cases with code 81.06 .................................................................................................. 456—Cases with code 81.07 .................................................................................................. 456—Cases with code 81.08 .................................................................................................. 457—All cases ........................................................................................................................ 457—Cases with code 81.06 .................................................................................................. 457—Cases with code 81.07 .................................................................................................. 457—Cases with code 81.08 .................................................................................................. 458—All cases ........................................................................................................................ 458—Cases with code 81.06 .................................................................................................. 458—Cases with code 81.07 .................................................................................................. 458—Cases with code 81.08 .................................................................................................. 459—All cases ........................................................................................................................ 459—Cases with code 81.06 .................................................................................................. 459—Cases with code 81.07 .................................................................................................. 459—Cases with code 81.08 .................................................................................................. 460—All cases ........................................................................................................................ 460—Cases with code 81.06 .................................................................................................. 460—Cases with code 81.07 .................................................................................................. 460—Cases with code 81.08 .................................................................................................. We also analyzed data for combinations of the spinal fusion codes that result in assignment to MS–DRGs 453, 454, and 455. We evaluated the following combinations: • 81.06 (Lumbar and lumbosacral fusion of the anterior column, anterior technique) and 81.07 (Lumbar and lumbosacral fusion of the posterior column, posterior technique). • 81.06 (Lumbar and lumbosacral fusion of the anterior column, anterior technique) and 81.08 (Lumbar and lumbosacral fusion of the anterior column, posterior technique). We further analyzed data with the following combination of spinal fusion VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 codes in MS–DRGs 456, 457, and 458 and MS–DRGs 459 and 460: • 81.07 (Lumbar and lumbosacral fusion of the posterior column, posterior technique) and 81.08 (Lumbar and lumbosacral fusion of the anterior column, posterior technique). The chart below shows the results of the data analysis for the combination of procedure codes listed above where an anterior and posterior spinal fusion was performed in the same episode of care. There were a total of 1,190 cases in MS– DRG 453, with an average length of stay of 13.08 days and average costs of $71,693. The cases reporting the combination of procedure codes 81.06 and 81.08 in this same MS–DRG totaled PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 51535 1,115 54 22 278 3,079 119 98 1,194 1,389 115 76 827 3,650 164 165 2,468 60,865 2,681 3,709 46,565 Average length of stay 13.14 14.37 12.32 12.04 6.74 6.42 6.49 5.73 3.91 3.49 3.16 3.60 8.92 9.12 8.65 8.25 3.75 3.27 3.67 3.66 Average costs $63,856 52,392 46,828 56,585 41,500 36,468 36,532 35,272 32,946 29,089 30,551 30,570 40,218 40,150 37,970 38,010 25,268 26,464 23,334 24,571 431, with an average length of stay of 11.59 days and average costs of $69,859. Results for the procedure code combination (81.06 and 81.08) in MS– DRGs 454 and 455 with regard to volume of cases, length of stay, and average costs data also support that these spinal fusion procedure code combinations are appropriately placed in their current MS–DRG assignments. Likewise, for MS–DRGs 456, 457, and 458, the data support that the spinal fusion procedure code combinations of 81.07 and 81.08 are appropriately placed in their current MS–DRG assignments. There were a total of 1,115 cases in MS–DRG 456 with an average length of stay of 13.14 days and average E:\FR\FM\18AUR2.SGM 18AUR2 51536 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations costs of $68,856. The cases reporting the combination of procedure codes 81.07 and 81.08 in this same MS–DRG totaled 54, with an average length of stay of 14.37 days and average costs of $52,392. Results for the procedure code combination (81.07 and 81.08) in MS– DRGs 457 and 458 with regard to volume of cases and average length of stay were lower compared to all the cases in those two MS–DRGs. While the data show higher average costs for the procedure code combination of 81.07 and 81.08 in MS–DRGs 457 and 458, as stated previously, the volume was extremely low. Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 453—All cases ........................................................................................................................ 453—Cases with codes 81.06 and 81.07 ............................................................................... 453—Cases with codes 81.06 and 81.08 ............................................................................... 454—All cases ........................................................................................................................ 454—Cases with codes 81.06 and 81.07 ............................................................................... 454—Cases with codes 81.06 and 81.08 ............................................................................... 455—All cases ........................................................................................................................ 455—Cases with codes 81.06 and 81.07 ............................................................................... 455—Cases with codes 81.06 and 81.08 ............................................................................... 456—All cases ........................................................................................................................ 456—Cases with codes 81.07 and 81.08 ............................................................................... 457—All cases ........................................................................................................................ 457—Cases with codes 81.07 and 81.08 ............................................................................... 458—All cases ........................................................................................................................ 458—Cases with code 81.07 and 81.08 ................................................................................ mstockstill on DSK4VPTVN1PROD with RULES2 As the focus of the analysis was to evaluate procedure code 81.08 in comparison to procedure code 81.06, we believe the AxiaLIF technology (procedure code 81.08) is grouped appropriately in its current MS–DRG assignments, as is the XLIF® procedure (procedure code 81.06). The volume, length of stay, and cost data analyzed demonstrate that the complexity of services and resources utilized for each of these technologies are properly accounted for in their respective MS– DRG assignments. Therefore, the data did not support making changes for procedure code 81.08. As a result, we did not propose to reassign cases reporting this procedure code to the combined fusion MS–DRGs. We invited public comment on our proposal to not reassign procedure code 81.08 from MS–DRGs 456 through 460 to MS–DRGs 453 through 455 for FY 2012. Comment: Several commenters supported our proposal to not reassign procedure code 81.08 to MS–DRGs 453 through 455. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to not reassign procedure code 81.08 to MS–DRGs 453 through 455. 6. MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue, and Breast): Excisional Debridement of Wound, Infection, or Burn We received a request that we remove procedure code 86.22 (Excisional debridement of wound, infection, or burn) from the list of codes considered to be O.R. procedures. The commenter stated that many inpatient excisional debridements are performed in a patient’s room instead of in an operating room. The commenter believed that the original assignment of procedure code 86.22 to the O.R. list served to help reflect the resource intensity required by a patient with wounds and ulcers that required an excisional debridement. The commenter stated that, by doing so, the code served as a proxy for severity of illness in the original CMS DRGs prior to the implementation of MS–DRGs in FY 2008. The commenter stated that the creation of the most serious pressure ulcer codes for stage 3 and stage 4 pressure ulcers (codes 707.23 and 707.24) allows these conditions to be classified as MCCs. Therefore, the commenter stated that the need to use procedure code 86.22 to capture severity Average length of stay 1,190 8 431 3,052 47 1,825 2,747 40 2,053 1,115 54 3,079 29 1,389 23 13.08 14.00 11.59 6.38 6.83 5.71 3.63 4.28 3.43 13.14 14.37 6.74 5.97 3.91 3.22 Procedure code All cases with no other OR procedure Average cost (A) 86.22 ................................................................................................................ 32,152 $12,427 $17,332 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00062 Fmt 4701 Sfmt 4700 $71,693 109,089 69,859 48,311 60,743 47,144 37,378 47,794 37,793 63,856 52,392 41,500 60,820 32,946 51,942 of illness was no longer needed. The commenter also stated that procedure code 86.22 is a non-O.R. code under the APR–DRGs and does not affect the DRG assignment. The commenter requested that procedure code 86.22 be changed from an O.R. procedure code to a nonO.R. procedure code. As the commenter stated, excisional debridements are currently captured in procedure code 86.22. Procedure code 88.22 is classified as an O.R. procedure in the current MS–DRGs and, therefore, leads to a surgical MS–DRG assignment. We examined MedPAR claims data on all excisional debridement cases and found that these debridement cases use appreciably fewer resources than other cases in their current surgical DRGs. However, for the proposed rule, we determined that if we were to classify debridement cases as non-O.R. cases and assign them to medical DRGs, we would significantly underpay these cases. The following chart shows differences in average costs for all excisional debridement cases compared to other cases within their current MS– DRG and compared to medical DRGs to which the patients would be assigned if the procedure were reclassified as a non-O.R. procedure. Average costs in surgical DRGs to which the patients are assigned (B) VerDate Mar<15>2010 Average costs E:\FR\FM\18AUR2.SGM 18AUR2 Average costs in medical DRGs to which the patients would be assigned (C) $8,070 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations The chart illustrates that when debridement is the only O.R. procedure, it is assigned to MS–DRGs that have an average cost that is approximately $5,000 more than the actual cost of the debridement ($12,427 versus $17,332). Conversely, if the debridement is made a non-O.R. code, it would, on average, be assigned to MS–DRGs that have an average cost that is approximately $4,000 less than the actual cost of the debridement ($8,070 versus $12,427). Therefore, we believe it would be inappropriate to propose to classify these procedures as a non-O.R. procedure. For the proposed rule, we explored alternative approaches to classifying procedure code 86.22 as a non-O.R. procedure. We evaluated the possibility of removing excisional debridements from their current MS–DRG assignments within the following skin-related MS– DRGs, where they are combined with skin grafts, and creating a new set of debridement MS–DRGs. The current MS–DRGs that combine skin grafts and debridements into the same MS–DRGs are as follows: 51537 • MS–DRGs 573 through 575 (Skin Graft &/or Debridement for Skin Ulcer or Cellulitis with MCC, with CC, and without CC/MCC, respectively). • MS–DRGs 576 through 578 (Skin Graft &/or Debridement Except for Skin Ulcer or Cellulitis with MCC, with CC, and without CC/MCC, respectively). We analyzed MedPAR claims data on the severity level of graft cases without any debridements in these six MS– DRGs. Our findings are shown in the chart below. SKIN GRAFTS WITHOUT DEBRIDEMENTS Number of cases MS–DRG MS–DRGs MS–DRGs MS–DRGs MS–DRGs MS–DRGs MS–DRGs 573–575—Cases 573–575—Cases 573–575—Cases 576–578—Cases 576–578—Cases 576–578—Cases with with with with with with severity severity severity severity severity severity level level level level level level of of of of of of We compared these data to a proposed new set of skin-related MS– DRGs that would include only MCC ....................................................................... CC .......................................................................... without CC/MCC ..................................................... MCC ....................................................................... CC .......................................................................... without CC/MCC ..................................................... debridements. The results of the findings of the severity levels of debridements without skin grafts in 751 1,720 540 335 1,482 1,849 Average length of stay 14.56 10.16 5.36 10.28 5.28 3.01 Average costs $23,975 14.869 8,469 22,996 11,299 6,986 these six MS–DRGs are shown in the chart below. DEBRIDEMENTS WITHOUT SKIN GRAFTS Number of cases MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG MS–DRG 573–575—Cases 573–575—Cases 573–575—Cases 576–578—Cases 576–578—Cases 576–578—Cases with with with with with with severity severity severity severity severity severity level level level level level level Our findings indicate that the graft procedure cases have higher average costs than the excisional debridement cases. The average costs for the excisional debridement cases in MS– of of of of of of MCC ......................................................................... CC ............................................................................ without CC/MCC ...................................................... MCC ......................................................................... CC ............................................................................ without CC/MCC ...................................................... DRGs 573 through 575 compared to the debridement cases in MS–DRGs 576 through 578 are very similar. We believe that the data support creating a single set of skin-related excisional 3,177 6,649 2,555 271 638 285 Average length of stay 11.73 7.67 4.94 11.59 7.61 4.45 Average costs $18,381 10,730 6,372 19,429 11,913 6,928 debridement MS–DRGs composed of cases previously captured in MS–DRGs 573 through 575 as well as MS–DRGs 576 through 578. The following chart illustrates those combined average costs. EXCISIONAL DEBRIDEMENTS FROM MS–DRGS 573 THROUGH 578 SPLIT ON SEVERITY LEVEL Number of cases MS–DRGs 573—578 mstockstill on DSK4VPTVN1PROD with RULES2 Combined Excisional Debridement Cases with Severity Level of MCC ................................................. Combined Excisional Debridement Cases with Severity Level of CC .................................................... Combined Excisional Debridement Cases with Severity Level of without CC/MCC .............................. As we stated in the proposed rule, we believe that the data support separating skin graft procedures from excisional debridements by creating a new set of MS–DRGs. This would result in more accurate payment for both skin grafts VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 and debridement. Therefore, we proposed to remove excisional debridements (procedure code 86.22) from their current MS–DRG assignments within MS–DRGs 573 through 578 for skin grafts and assign them to new PO 00000 Frm 00063 Fmt 4701 Sfmt 4700 3,448 7,287 2,840 Average length of stay 11.71 7.76 4.89 Average costs $18,463 10,833 6,428 excisional debridement MS–DRGs. We proposed to maintain MS–DRGs 573 through 578 for skin grafts. The following list describes the proposed new and revised MS–DRG titles: E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51538 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Proposed new MS–DRGs based on procedure code 86.22: • Proposed MS–DRG 570 (Skin Debridement with MCC) • Proposed MS–DRG 571 (Skin debridement with CC) • Proposed MS–DRG 572 (Skin Debridement without CC/MCC) Proposed Revised MS–DRGs based on codes currently assigned to MS–DRGs 573 through 578, excluding procedure code 86.22: • Proposed revised MS–DRG 573 (Skin Graft for Skin Ulcer or Cellulitis with MCC) • Proposed revised MS–DRG 574 (Skin Graft for Skin Ulcer or Cellulitis with CC) • Proposed revised MS–DRG 575 (Skin Graft for Skin Ulcer or Cellulitis without CC/MCC) • Proposed revised MS–DRG 576 (Skin Graft Except for Skin Ulcer or Cellulitis with MCC) • Proposed revised MS–DRG 577 (Skin Graft except for Skin Ulcer or Cellulitis with CC) • Proposed revised MS–DRG 578 (Skin Graft Except for Skin Ulcer or Cellulitis without CC/MCC) In the proposed rule, we invited public comments on our proposal for FY 2012 to create three new debridement MS–DRGs 570, 571, and 572 for skin debridement and to revise MS–DRGs 573 through 578 to include skin grafts only, as indicated above. Comment: Several commenters supported our proposal to create three new debridement MS–DRGs, MS–DRGs 570, 571, and 572 for skin debridement and to revise MS–DRGs 573 through 578 to include skin grafts only, as described above. One commenter stated that the proposal seemed reasonable, given the data and the information provided. Another commenter who supported this MS–DRG modification expressed appreciation for the change because the relative weights better reflect resource intensive cases with the proposed new and revised MS–DRGs 570 through 578. One commenter supported our recommendation not to remove the code for excisional debridement from the O.R. list. However, the commenter opposed removing excisional debridements (procedure code 86.22) from their current MS–DRG assignments within MS–DRGs 573 through 578 for skin grafts and assigning them to new excisional debridement MS–DRGs and maintaining MS–DRGs 573 through 578 for skin grafts. The commenter stated that excisional debridement is not exclusively a bedside procedure. Rather, the commenter noted, it can be performed in or out of the operation VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 room, based on the judgment of the surgeon. The commenter stated that, in many instances, this procedure cannot be performed at the bedside due to variables such as patient anxiety, the size of the wound, bleeding risk, among others. The commenter stated that removing excisional debridements from their current MS–DRG assignments could harm many hospitals that perform procedures such as split thickness skin grafts for extensive wound or burns. The commenter recommended that, instead of removing excisional debridements from the current MS–DRG assignments, CMS create a separate ICD–9–CM code for debridement that is performed in the operating room due to anesthesia, equipment, or monitoring requirements. Another commenter opposed the creation of separate debridement and skin graft MS–DRGs out of concern that this would create significant confusion among hospital coders. The commenter stated that skin grafts and skin debridements are often performed on the same patient. The commenter stated that the current descriptions of MS– DRGs 573 through 575 (Skin Graft and/ or Debridement for Skin Ulcer or Cellulitis with MCC, with CC, and without CC/MCC, respectively) and MS–DRGs 576 through 578 (Skin Graft and/or Debridement Except for Skin Ulcer or Cellulitis with MCC, with CC, and without CC/MCC, respectively) appropriately describe the interrelationship between skin grafts and debridement. The commenter expressed concern that de-linking this relationship would lead to confusion for coders. Response: We agree with the commenters that data support the creation of three new debridement MS– DRGs 570, 571, and 572 for skin debridement and the revision of MS– DRGs 573 through 578 to include skin grafts only. We disagree with the commenter who recommends that, instead of creating separate MS–DRGs for skin debridements and skin grafts, CMS pursue the creation of a new skin debridement code that would be limited to those procedures performed in an operating room setting. ICD–9–CM codes are not currently subdivided based on the location of the procedure such as in an operating room, endoscopy room, catheterization room, treatment room, or patient room. ICD–9– CM codes are assigned based on the procedure performed, not the location in which the procedure was performed. Furthermore, we have just begun a period of a partial freeze of both ICD– 9–CM and ICD–10 codes. This partial freeze is discussed in section II.G.13.b. PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 of this preamble. We do not believe it is appropriate to postpone refinements to the MS–DRGs until a code update could be made and data on cases reported with the new code could be evaluated. We believe the current data support this proposed modification. However, as stated earlier, ICD–9–CM codes do not indicate the setting in which a procedure is performed. Therefore, it is unlikely that such a code would be created even if we were not in a period of a code freeze. We also disagree with the commenter who stated that creating separate MS– DRGs for skin debridements and skin grafts will create confusion for coders. We believe that coders clearly understand the difference between skin debridements and skin grafts. If both are performed, then coders code and report both procedures. The fact that the MS– DRGs would be modified would not affect the way in which coders assign codes for skin debridements and skin grafts. We also note that organizations representing coders, including the American Health Information Management Association, supported this proposed MS–DRG modification. These organizations did not express concerns about any possible confusion for coders. After consideration of the public comments we received, we are finalizing our proposal to create the following new and revised MS–DRGs: New MS–DRGs based on procedure code 86.22: • MS–DRG 570 (Skin Debridement with MCC) • MS–DRG 571 (Skin debridement with CC) • MS–DRG 572 (Skin Debridement without CC/MCC) Revised MS–DRGs based on codes currently assigned to MS–DRGs 573 through 578, excluding procedure code 86.22: • Revised MS–DRG 573 (Skin Graft for Skin Ulcer or Cellulitis with MCC) • Revised MS–DRG 574 (Skin Graft for Skin Ulcer or Cellulitis with CC) • Revised MS–DRG 575 (Skin Graft for Skin Ulcer or Cellulitis without CC/ MCC) • Revised MS–DRG 576 (Skin Graft Except for Skin Ulcer or Cellulitis with MCC) • Revised MS–DRG 577 (Skin Graft except for Skin Ulcer or Cellulitis with CC) • Revised MS–DRG 578 (Skin Graft Except for Skin Ulcer or Cellulitis without CC/MCC) E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 7. MDC 10 (Endocrine, Nutritional, and Metabolic Diseases and Disorders) mstockstill on DSK4VPTVN1PROD with RULES2 a. Nutritional and Metabolic Diseases: Update of MS–DRG Titles We received a request to revise the MS–DRG titles for MS–DRGs 640 through 642 to more clearly capture the cases that are currently assigned to these MS–DRGs. The current titles for these MS–DRGs are: MS–DRGs 640 (Nutritional & Miscellaneous Metabolic Disorders with MCC); MS–DRG 641 (Nutritional & Miscellaneous Metabolic Disorders without MCC); and MS–DRG 642 (Inborn Errors of Metabolism). The requestor suggested that we change the titles to: MS–DRG 640 (Miscellaneous Disorders of Nutrition, Metabolism, and Fluids and Electrolytes with MCC); MS– DRG 641 (Miscellaneous Disorders of Nutrition, Metabolism, and Fluids and Electrolytes without MCC); and MS– DRG 642 (Inborn and Other Disorders of Metabolism). Our clinical advisors supported these suggested changes to the titles, as the suggested changes would provide a better description of the diagnoses assigned to MS–DRGs 640, 641, and 642. Therefore, in the FY 2012 IPPS/ LTCH PPS proposed rule, we proposed to revise the MS–DRG titles for MS– DRGs 640, 641, and 642 as the requestor suggested. We invited public comment on our proposal to change the MS–DRG titles for MS–DRGs 640, 641, and 642 for FY 2012. Comment: Several commenters supported our proposed changes to the titles of MS–DRGs 640 through 642 to better reflect the cases that are assigned to these MS–DRGs. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are finalizing our proposal to change the titles for MS–DRGs 640 through 642. The final tiles are as follows: • MS–DRG 640 (Miscellaneous Disorders of Nutrition, Metabolism, and Fluids and Electrolytes with MCC) • MS–DRG 641 (Miscellaneous Disorders of Nutrition, Metabolism, and Fluids and Electrolytes without MCC) • MS–DRG 642 (Inborn and Other Disorders of Metabolism). b. Sleeve Gastrectomy Procedure for Morbid Obesity Sleeve gastrectomy is a 70 percent to 80 percent greater curvature gastrectomy (sleeve resection of the stomach) with continuity of the gastric lesser curve being maintained while simultaneously reducing stomach volume. It may be the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 first step in a two-stage procedure when performing Roux-en-Y Gastric Bypass (RYGBP). Sleeve gastrectomy, whether open or laparoscopic, is currently coded using ICD–9–CM procedure code 43.89 (Other total gastrectomy). Procedure code 43.89 is currently assigned to several MS–DRGs. However, the code is not assigned to MS–DRG 619, 620, or 621 (O.R. Procedures for Obesity with MCC, with CC, and without CC/MCC, respectively). We received a request for CMS to review MDC 10 (Endocrine, Nutritional, and Metabolic Diseases and Disorders) for consistency. Specifically, the requestor questioned why diagnosis code 278.01 (Morbid obesity), when paired on a claim with procedure code 43.89, would be assigned to MS–DRG 981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, or without CC/MCC, respectively) instead of MS–DRG 619, 620, or 621. Upon review for the FY 2012 IPPS/ LTCH PPS proposed rule, we determined that diagnosis code 278.01 is assigned to MDC 10. However, procedure code 43.89 is not assigned to any MS–DRG set in this MDC. Therefore, the cases are assigned to MS– DRGs 981 through 983, reflecting procedures not related to the principal diagnosis. This was an inadvertent oversight on CMS’ part when the MS– DRGs were created. Therefore, we proposed to add a procedure code or codes identifying sleeve gastrectomy to MS–DRGs 619 through 621 for FY 2012. Currently, sleeve gastrectomy is identified in the ICD–9–CM procedure code Index as follows: Gastrectomy (partial) (subtotal) NEC 43.89. At procedure code 43.89 in the ICD–9–CM procedure code Tabular, an inclusion note identifies this code as including sleeve resection of the stomach. In our proposal to add a procedure code or codes to MS–DRGs 619 through 621, we pointed out that there is an NCD that has precluded coverage of sleeve gastrectomy when performed either open or laparoscopically. This decision may be found in the Medicare National Coverage Determination Manual, Section 100.1, Nationally Noncovered Indications for Bariatric Surgery for Treatment of Morbid Obesity, effective on February 12, 2009. This manual is available on the CMS Web site through a link at: https:// www.cms.gov/manuals/downloads/ mcd103c1_Part2.pdf. This manual entry affirms that treatment for obesity via use of the open or laparoscopic sleeve gastrectomy is determined to be noncovered for Medicare beneficiaries. PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 51539 Noncoverage of these cases is determined by our Medicare contractors, the fiscal intermediary or A–B/MAC, because of the nature of procedure code 43.89, which is a code that identifies several gastrectomy procedures. To identify a code in the MCE that describes many procedures would inappropriately restrict other procedures which are also described by that code, but which are covered. We received a request to create specific codes uniquely identifying both laparoscopic sleeve gastrectomy and the open procedure, vertical sleeve gastrectomy. We addressed this request at the ICD–9–CM Coordination and Maintenance Committee meeting held on March 9, 2011. We had stated that should a code or codes be created as a result of this request, we would then be able to add this code or codes to the MCE as a conforming noncoverage edit when combined with diagnosis code 278.01. The background information discussing sleeve gastrectomy coding can be accessed on the CMS Web site at: http: //www.cms.gov/ ICD9ProviderDiagnosticcodes/ 03_meetings.asp#TopOfPage. A summary of the meeting can be found on CMS’ Web site for the ICD–9–CM Coordination and Maintenance Committee at: https://www.cms.gov/ ICD9ProviderDiagnosticCodes/ 03_meetings.asp#TopOfPage by scrolling down to the .pdf zip files containing the meeting agenda and handouts. Therefore, for FY 2012, we proposed to add a procedure code or codes identifying sleeve gastrectomy to MS– DRGs 619 through 621. However, we also indicated that we intended to add any code or codes created at the ICD– 9–CM Coordination and Maintenance Committee on March 9, 2011, to the MCE because sleeve gastrectomy, whether open or laparoscopic, is not covered for Medicare beneficiaries. The code or codes would appear in the ‘‘Noncovered Procedures’’ edit of the MCE. As the timing of the development of the proposed rule and the date of the March 2011 meeting of the ICD–9–CM Coordination and Maintenance Committee overlapped, we could not determine if additional sleeve gastrectomy codes would be created, to what code number or numbers they would be assigned, or how the narrative describing them would read. However, we indicated that should a code or codes be created, we proposed that they would simultaneously be placed in both MS–DRGs 619 through 621 and the MCE. This decision may seem to be counterintuitive, but CMS realizes that E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51540 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations our MS–DRGs and the Medicare GROUPER program are used for other beneficiaries and by other insurance plans rather than strictly for Medicare beneficiaries. Any new code or codes created as a result of the ICD–9–CM Coordination and Maintenance Committee meeting are included in Table 6B (which is listed in section VI. of the Addendum to this final rule and available via the Internet at https:// www.cms.gov/ ICD9ProviderDiagnosticCodes/ 04_addendum.asp#TopOfPage); we indicated that we did not have a mechanism to make the codes from the March 9, 2011 meeting available in the proposed rule prior to the final rule’s publication. As a result of the March 9, 2011 ICD– 9–CM Coordination and Maintenance Committee Meeting, one code was created: Procedure code 43.82 (Laparoscopic vertical (sleeve) gastrectomy). To address open gastrectomies, the title of existing code 43.89 was revised to read ‘‘Open and other partial gastrectomy’’. Both codes can be found in Table 6B (New Procedure Codes) and Table 6F (Revised Procedure Code Titles), which are listed in the Addendum to this final rule and available via the Internet on the CMS Web site. Comment: Several commenters addressed both the creation of a code or codes for laparoscopic or open sleeve gastrectomy discussed above and the proposed changes to the MCE. Several commenters indicated that they had no objections to the proposed changes to the MS–DRG classifications and the MCE, stating that the proposed changes seemed reasonable, given the data and information provided. One commenter specifically requested that CMS finalize its proposal to add new procedure code 43.82 to the MCE as a noncovered procedure. Response: We appreciate the commenters’ support of our proposal. Comment: One commenter stated that they understood that procedure code 43.89 was inadvertently omitted from MS–DRGs 619, 620, and 621 when the MS–DRGs were created and supported the addition of this code to these MS– DRGs. In addition, this commenter stated that because procedure code 43.89 is not specific to open sleeve gastrectomy, it cannot be incorporated as a ‘‘noncovered procedure’’ in the MCE. Response: We appreciate the commenter’s support for this proposal and agree that procedure code 43.89 includes several gastrectomy procedures. Therefore, to identify a code describing many procedures in an MCE VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 edit would inappropriately restrict other procedures included in that code that are covered. After consideration of the public comments we received, we are adopting as final our proposal to assign both the new procedure code 43.82 (Laparoscopic vertical (sleeve) gastrectomy) and the existing procedure code 43.89 (Other total gastrectomy) to MS–DRGs 619, 620, and 621 (O.R. Procedures for Obesity with MCC, with CC, and without CC/MCC, respectively). In addition, we are adding procedure code 43.82 to the ‘‘Noncovered Procedures’’ edit of the MCE because laparoscopic sleeve gastrectomy is not covered for Medicare beneficiaries. Because procedure code 43.89 includes several gastrectomy procedures, its inclusion in the MCE would be inappropriate. Therefore, it will not be placed on the MCE. 8. MDC 15 (Newborns and Other Neonates With Conditions Originating in the Perinatal Period): Discharge Status Code 66 (Discharged/Transferred to Critical Assess Hospital (CAH)) In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50236), we finalized our transfer policy regarding transfer of patients from an acute care hospital to a CAH. In that final rule, we stated that hospitals are required to use patient discharge status code 66 on the IPPS claims to identify transfers to CAHs. With this new requirement, a discharge from an IPPS hospital to a CAH equates to a transfer status. However, discharge status code 66 is currently not included in the MS–DRG GROUPER logic for MS–DRG 789 (Neonate, Died or Transferred to Another Acute Care Facility). Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to add discharge status code 66 to the MS–DRG GROUPER logic for MS–DRG 789. We invited public comment on our proposal to add discharge status code 66 to the MS–DRG GROUPER logic for MS–DRG 789 for FY 2012. Comment: Several commenters supported our proposal to add discharge status code 66 to the MS–DRG GROUPER logic for MS–DRG 789. Response: We appreciate the support of the commenters. After consideration of the public comments we received, we are finalizing our proposal to add discharge status code 66 (Discharged/Transferred to Critical Assess Hospital (CAH)) to the MS–DRG GROUPER logic for MS–DRG 789. PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 9. 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 an MS– DRG. In this final rule, we discuss our intention to make the following change to the MCE edits. In section II.G.7.b. of this preamble, we discuss that the current ICD–9–CM procedure code for sleeve gastrectomy (43.89 (Other partial gastrectomy, other)) is a noncovered code when performed for resection of the stomach in patients with morbid obesity. We also discuss that noncoverage for Medicare beneficiaries of cases containing procedure code 43.89 is determined by the fiscal intermediaries or A–B/MACs because of the nature of procedure code 43.89. This code is imprecise and identifies several other gastrectomy procedures in addition to sleeve resection. Therefore, to limit coverage by identifying a code that describes many procedures through the use of the MCE would inappropriately restrict other procedures that are covered by Medicare. In that section, we also state that we received a request to create specific procedure codes identifying both laparoscopic sleeve gastrectomy and open vertical sleeve gastrectomy. As we stated above, we addressed this request at the ICD–9–CM Coordination and Maintenance Committee meeting held on March 9, 2011. In the FY 2012 IPPS/LTCH PPS proposed rule (FR 76 25833 and 25834), we indicated that if a code or codes should be created as a result of this request, we would then be able to add these codes to the MCE as a conforming noncoverage edit when combined with diagnosis code 278.01 (Morbid obesity). As the timing of development of the proposed rule and the scheduling of the ICD–9–CM Coordination and Maintenance Committee meeting on March 9, 2011 overlapped, it was not possible to determine what those codes might be, or even if they would be created for FY 2012. However, we indicated in the proposed rule that should a code or codes be created, we proposed that any code or codes for laparoscopic or open sleeve resection of the stomach would be added to the MCE as a noncovered procedure or E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations procedures, in combination with diagnosis code 278.01. The background information discussing sleeve gastrectomy coding can be accessed on the CMS Web site at: https:// www.cms.gov/ ICD9ProviderDiagnosticcodes/ 03_meetings.asp#TopOfPage. New codes describing sleeve gastrectomy are included in Table 6B (which is listed in section VI. of the Addendum to this final rule and are also available via the Internet at https://www.cms.gov/ ICD9ProviderDiagnosticCodes/ 04_addendum.asp#TopOfPage). In the proposed rule, we indicated that we did not have a mechanism to make the codes available prior to the final rule’s publication, and invited public comments on this proposal. As a result of the March 9, 2011 ICD– 9–CM Coordination and Maintenance Committee Meeting, one code was created: procedure code 43.82 (Laparoscopic vertical (sleeve) gastrectomy). To address open gastrectomies, the title of existing procedure code 43.89 was revised to read ‘‘Open and other partial gastrectomy’’. Both codes can be found in Tables 6B and 6F, which are listed in the Addendum to this final rule and available via the Internet. Comment: Several commenters indicated that they had no objections to the proposed changes to the MS–DRG classifications and the MCE, stating that the proposed changes seemed reasonable, given the data and information provided. One commenter specifically requested that CMS finalize its proposal to add new procedure code 43.82 to the MCE as a noncovered procedure. Response: We appreciate the commenters’ support of our proposals. Comment: Several commenters stated that because procedure code 43.89 is not specific to open sleeve gastrectomy it cannot be incorporated as a ‘‘noncovered procedure’’ in the MCE. Response: We agree that procedure code 43.89 includes several gastrectomy procedures, and to identify this code describing many procedures in an MCE edit would be inappropriately restricting other procedures that are covered. Comment: One commenter recognized that procedure codes discussed at the ICD–9–CM Coordination and Maintenance Committee Meeting of March 9, 2011 could not logistically be included in the IPPS proposed rule. The commenter urged CMS to apply current logic to code revisions that were discussed at the March 2011 ICD–9–CM Coordination and Maintenance Committee meeting, but which could VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 not be finalized in time to include them in the proposed rule. Response: We appreciate that the public understands some of the timing constraints under which we must operate. We assure the public that the same logic considerations regarding code assignment to predecessor MS– DRGs as well as O.R. determinations are applied to newly created codes from the March 2011 ICD–9–CM Coordination and Maintenance Committee Meeting as were applied to the codes created as a result of the September 15, 2010 ICD– 9–CM Coordination and Maintenance Committee Meeting. After consideration of the public comments we received, we are adopting as final our proposal to add procedure code 43.82 to the ‘‘Noncovered Procedures’’ edit of the MCE, given that laparoscopic sleeve gastrectomy is not covered for Medicare beneficiaries. Because procedure code 43.89 includes several gastrectomy procedures, its inclusion in the MCE would be inappropriate. Therefore, we are not placing it on the MCE. 10. 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 methodology for determining the most resource-intensive surgical class PO 00000 Frm 00067 Fmt 4701 Sfmt 4700 51541 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 hierarchy change, the average costs are likely to shift such that the higher- E:\FR\FM\18AUR2.SGM 18AUR2 51542 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations ordered surgical class has a lower average costs than the class ordered below it. As we proposed, based on the changes that we are make for FY 2012, as discussed in sections II.G.1. and 6. of this preamble, we are revising the surgical hierarchy for Pre-MDCs and MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue, and Breast) as follows: In Pre-MDCs, we are reordering new MS–DRG 016 (Autologous Bone Marrow Transplant with CC/MCC) and new MS– DRG 017 (Autologous Bone Marrow Transplant without CC/MCC) above MS–DRG 010 (Pancreas Transplant). In MDC 9, we are reordering— • MS–DRG 578 (Skin Graft Except for Skin Ulcer or Cellulitis without CC/ MCC) above new MS–DRG 570 (Skin Debridement with MCC); • New MS–DRG 570 above new MS– DRG 571 (Skin Debridement with CC); • New MS–DRG 571 above new MS– DRG 572 (Skin Debridement without CC/MCC; and • New MS–DRG 572 above MS–DRG 579 (Other Skin, Subcutaneous Tissue, and Breast Procedures with MCC). Comment: Commenters generally supported our proposals. Response: Based on these public comments and our review of the proposed revisions using the March 2011 update of the FY 2010 MedPAR file and the revised GROUPER software, we found that the revisions are still supported by the data. Therefore, we have incorporated the proposed revisions to the surgical hierarchy as final for FY 2012. mstockstill on DSK4VPTVN1PROD with RULES2 11. Complications or Comorbidity (CC) Exclusions List 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). VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 b. CC Exclusions List for FY 2012 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 00068 Fmt 4701 Sfmt 4700 (1) Limited Revisions Based on Changes to the ICD–9–CM Diagnosis Codes For FY 2012, we proposed to make 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, 2011. (We refer readers to section II.G.13. of the preamble of this final rule for a discussion of ICD–9–CM changes.) We proposed to make these changes in accordance with the principles established when we created the CC Exclusions List in 1987. In addition, we indicated 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. CMS encourages input from our stakeholders concerning the annual IPPS updates when that input is made available to us by December of the year prior to the next annual proposed rule update. For example, to be considered for any updates or changes in FY 2012, comments and suggestions should have been submitted by early December 2010. The following comments were submitted in a timely manner and, therefore, are being discussed in this section. (A) Pressure Ulcer Diagnosis Codes We received a comment recommending that CMS remove diagnosis codes 707.23 (Pressure ulcer, stage III) and 707.24 (Pressure ulcer, stage IV) from the CC Exclusion List when reported as a secondary diagnosis code with a principal diagnosis code for the pressure ulcer site: Diagnosis code 707.00 (Pressure ulcer, unspecified); diagnosis code 707.01 (Pressure ulcer, 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), the FY 2010 final rule (74 FR 43799); and the FY 2011 final rule (75 FR 50114). 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. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations elbow); diagnosis code 707.02 (Pressure ulcer, upper back); diagnosis code 707.03 (Pressure ulcer, lower back); diagnosis code 707.04 (Pressure ulcer, hip); diagnosis code 707.05 (Pressure ulcer, buttock); diagnosis code 707.06 (Pressure ulcer, ankle); diagnosis code 707.07 (Pressure ulcer, heel); or diagnosis code 707.09 (Pressure ulcer, other site). Currently, when a patient is admitted with a pressure ulcer, the CC Exclusion List prevents a pressure ulcer stage diagnosis code from being designated as an MCC when reported as a secondary diagnosis. The commenter disagreed with this approach and contended that a patient admitted for treatment of a stage III or stage IV pressure ulcer likely requires resources that would qualify the case as a diagnosis with an MCC or, at a minimum, as a CC. Our clinical advisors agreed with the commenter. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to remove diagnosis codes 707.23 and 707.24 from the CC Exclusion List when a principal diagnosis code of one of codes 707.00 through 707.09 is reported. Under this proposal, diagnosis code 707.23 or diagnosis code 707.24 would be an MCC when reported as a secondary diagnosis code with a principal diagnosis code of one of codes 707.00 through 707.09. Comment: Several commenters supported the proposed removal of diagnosis codes 707.23 and 707.24 from the CC Exclusion list when a principal diagnosis code of one of the codes 707.00 through 707.09 is reported. Response: We appreciate the support of the commenters. As stated above, we believe this proposed change has merit. After consideration of the public comments we received, we are adopting as final our proposal to remove diagnosis codes 707.23 (Pressure ulcer stage III) and 707.24 (Pressure ulcer stage IV) from the CC Exclusion List when reported as a secondary diagnosis code with a principal diagnosis code for the pressure ulcer site: diagnosis code 707.00 (Pressure ulcer, unspecified); diagnosis code 707.01 (Pressure ulcer, elbow); diagnosis code 707.02 (Pressure ulcer, upper back); diagnosis code 707.03 (Pressure ulcer, lower back); diagnosis code 707.04 (Pressure ulcer, hip); diagnosis code 707.05 (Pressure ulcer, buttock); diagnosis code 707.06 (Pressure ulcer, ankle); diagnosis code 707.07 (Pressure ulcer, heel); or diagnosis code 707.09 (Pressure ulcer, other site). VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 (B) End-Stage Renal Disease Diagnosis Code We received a suggestion from a commenter that diagnosis code 585.6 (End-stage renal disease) be added to the CC Exclusion List when reported with a principal diagnosis code of 403.90 (Hypertensive chronic kidney disease, unspecified, with chronic kidney disease stage I through stage IV, or unspecified) or diagnosis code 403.91 (Hypertensive chronic kidney disease, unspecified, with chronic kidney disease stage V or end-stage renal disease). Currently, diagnosis code 585.6 is designated as an MCC. According to the commenter, diagnosis codes 585.6 and 403.91 are essentially the same diagnosis but coding guidelines require the reporting of two codes to identify the stage of chronic kidney disease when associated with hypertensive chronic kidney disease. The commenter suggested that there is no need for diagnosis code 585.6 to be designated as an MCC when reported with a principal diagnosis of hypertensive chronic kidney disease, stage V or end-stage renal disease. The commenter also pointed out that, while coding guidelines would preclude diagnosis codes 403.90 and 585.6 from being reported together, the MS–DRG GROUPER allows diagnosis code 585.6 to act as an MCC when reported as a secondary diagnosis with principal diagnosis code 403.90. As discussed in the proposed rule, in response to the first issue, our clinical advisors disagree with the commenter. Diagnosis code 403.91 includes chronic kidney disease stage V or end-stage renal disease. These are two separate conditions (or stages) that are identified by two unique codes. Diagnosis code 585.5 identifies stage V chronic kidney disease and is classified as a CC. Diagnosis code 585.6 identifies endstage renal disease, is classified as an MCC, and describes patients who require chronic dialysis. The patients diagnosed with stage V chronic kidney disease are a different population who require different resources than those patients who are diagnosed with endstage renal disease. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule, we did not propose to add diagnosis code 585.6 to the CC Exclusion List when reported with a principal diagnosis of code 403.91. On the second issue raised by the commenter, our clinical advisors agreed. Diagnosis code 403.90 identifies patients with chronic kidney disease, stages I through IV or unspecified, and diagnosis code 585.6 identifies endstage renal disease. Our clinical advisors PO 00000 Frm 00069 Fmt 4701 Sfmt 4700 51543 indicate that the reporting of diagnosis code 585.6 should not be designated as an MCC in this case. We agreed with the commenter that diagnosis codes 403.90 and 585.6 should not be reported together as instructed by the Coding Guidelines. Only a code from the 585.1 through 585.4 range (stages I through IV, or unspecified) should be reported with diagnosis code 403.90. Diagnosis code 585.6 is the exclusive code that uniquely identifies end-stage renal disease and should only be reported with diagnosis code 403.91. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to add diagnosis code 585.6 to the CC Exclusion List when reported with a principal diagnosis code of 403.90. Comment: Several commenters supported our proposal to add diagnosis code 585.6 to the CC Exclusion List when reported with a principal diagnosis code of 403.90. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are adopting as final our proposal to add diagnosis code 585.6 (End stage renal disease) to the CC Exclusion List when reported with a principal diagnosis code of 403.90 (Hypertensive chronic kidney disease, unspecified, with chronic kidney disease stage I through stage IV, or unspecified). (C) Hypertensive Chronic Kidney Disease With Chronic Kidney Disease Stage V or End-Stage Renal Disease Code We received a comment recommending the addition of diagnosis code 403.91 (Hypertensive chronic kidney disease, unspecified, with chronic kidney disease stage V or endstage renal disease) to the CC Exclusion List when reported as a secondary diagnosis code with principal diagnosis code 585.6 (End stage renal disease). The commenter stated that it would be unlikely that diagnosis code 403.91 would be reported as a secondary diagnosis code with diagnosis code 585.6 as the principal diagnosis code due to sequencing rules for end-stage renal disease with hypertension. Currently, diagnosis code 403.91 is designated as a CC. Our clinical advisors agreed with the commenter. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to add diagnosis code 403.91 to the CC Exclusion List when reported as a secondary diagnosis code with principal diagnosis code 585.6. Comment: Several commenters supported our proposal to add diagnosis code 403.91 to the CC Exclusion List E:\FR\FM\18AUR2.SGM 18AUR2 51544 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations when reported as a secondary diagnosis code with principal diagnosis code 585.6. Response: We appreciate the commenters’ support. After consideration of the public comments we received, we are adopting as final our proposal to add diagnosis code 403.91 (Hypertensive chronic kidney disease, unspecified, with chronic kidney disease stage V or end stage renal disease) to the CC Exclusion List when reported as a secondary diagnosis code with principal diagnosis code 585.6 (End stage renal disease). Code Diagnosis (2) Suggested Changes to Severity Levels for Encephalopathy We received a request that we consider changing the following diagnosis codes from an MCC to a CC: • 348.30 (Encephalopathy NOS) • 348.31 (Metabolic encephalopathy) • 348.39 (Encephalopathy NEC) • 349.82 (Toxic encephalopathy) • 572.2 (Hepatic encephalopathy) For the FY 2012 IPPS/LTCH PPS proposed rule, we analyzed the claims data for the diagnosis codes mentioned above related to encephalopathy. We used the same approach we used in initially creating the MS–DRGs and classifying secondary diagnosis codes as 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. C1 34830 ....... 34831 ....... 34839 ....... 34982 ....... 5722 ......... mstockstill on DSK4VPTVN1PROD with RULES2 Diagnosis description Encephalopathy NOS .................................... Metabolic encephalopathy ............................ Encephalopathy NEC .................................... Toxic encephalopathy ................................... Hepatic encephalopathy ................................ VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 C2 The C2 value reflects a patient with at 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 Code We ran the following data as described in FY 2008 IPPS final rule (72 FR 47158 through 47161). 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 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. The chart above shows that the C1 findings ranged from a low of 1.5448 to a high of 2.3158. As stated earlier, a C1 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. The C1 findings suggest that these codes are more like a CC than a MCC. However, the C2 findings ranged from a low of 2.5054 to a high of 3.0023. Values close to 3.0 suggests the condition is more similar to an MCC than a CC or non-CC. The C2 findings support Cnt2 CC level MCC MCC MCC MCC MCC Cnt 1 10,082 6,389 4,004 4,333 1,375 Cnt 1 impact 2.1206 2.0580 2.1118 2.3158 1.5448 maintaining the encephalopathy codes as an MCC level. The data are clearly mixed between the C1 and C2 findings, and does not consistently support a change in the severity level. Our clinical advisers recommended that these encephalopathy codes remain at an MCC level because these patients with encephalopathy typically utilize significant resources and are at a higher severity level. Based on the clinical analysis and the lack of consistent claims data support for the severity level change, we indicated in the proposed rule that we believe that the encephalopathy codes should remain on the MCC list. Therefore, we proposed to retain the following encephalopathy codes on the MCC list: • 348.30 (Encephalopathy NOS) • 348.31 (Metabolic encephalopathy) • 348.39 (Encephalopathy NEC) • 349.82 (Toxic encephalopathy) • 572.2 (Hepatic encephalopathy) PO 00000 Frm 00070 Fmt 4701 Sfmt 4700 non-CCs, CCs, or MCCs. 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 nonCC, 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: Cnt3 C3 resource usage as an MCC. A value close to 3.0 suggests the condition is expected 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 (72 FR 47158 through 47161). The following chart shows the analysis for each of the encephalopathy diagnosis codes that are currently classified as MCCs. Cnt 2 impact Cnt 2 39,042 29,651 15,003 18,126 9,885 2.7774 2.6952 2.7355 3.0023 2.5054 Cnt 3 60,381 49,343 19,732 26,009 12,421 Cnt 3 impact 3.3702 3.4011 3.3708 3.5714 3.4435 We invited public comment on our proposal not to change the severity level classification for these codes. Comment: Several commenters supported our proposal not to change the MCC severity level classification for the encephalopathy codes listed above. The commenters agreed with our findings that the data were mixed between the C1 and C2 findings for these codes, which are currently on the MCC list, and that clinical evaluation of these conditions supports maintaining them on the MCC list. Response: We appreciate the commenters’ support. As stated above, our data showed mixed findings for C1 and C2 with C1 findings supporting a change to CC, but C2 findings supporting maintaining the codes on the MCC list. Our clinical advisors’ evaluation of encephalopathy patients supports our proposal to maintain these encephalopathy codes on the MCC list. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations After consideration of the public comments we received, as we proposed, we are keeping the following encephalopathy codes on the MCC list. • 348.30 (Encephalopathy NOS) MCC • 348.31 (Metabolic encephalopathy) MCC • 348.39 (Encephalopathy NEC) MCC • 349.82 (Toxic encephalopathy) MCC • 572.2 (Hepatic encephalopathy) MCC (3) Suggested Changes to Severity Levels for Mechanical Complication and Infection Due to Device-Related Codes We received a request to change the severity classification from CCs to MCCs for the following diagnosis codes: • 996.01 (Mechanical of cardiac device, implant and graft due to cardiac pacemaker (electrode)). • 996.04 (Mechanical complication of cardiac device, implant, and graft due to automatic implantable cardiac defibrillator). Code Diagnosis description CC Level 99601 ................ 99604 ................ 99661 ................ Malfunc cardiac pacemaker .................. Mch cmp autm mplnt dfbrl .................... React-cardiac dev/graft ......................... CC CC CC We reviewed the findings from these data. The C1 findings ranged from a low of 1.6723 to a high of 1.9922. As stated earlier, a value close to 2.0 in the C1 field suggests that the condition is more like a CC than a non-CC but not as significant in resource usage as an MCC. The C1 findings clearly support the current classification of these three codes on the CC list and the C2 findings supports this classification. Our clinical advisors agree that the data findings and their own clinical evaluation of the severity level of these conditions support the classification of these three codes on the CC list. Therefore, we proposed that these codes remain on the CC list. We invited public comment on this proposal. Cnt 1 Impact Cnt 1 1,296 419 149 1.6723 1.7041 1.9922 Comment: Several commenters supported our proposal to maintain the mechanical complication and infection due to device-related codes mentioned above on the CC list. The commenters agreed that the data as well as our clinical advisors’ evaluation support the current classification. Several commenters opposed our proposal to keep the mechanical complication and infection due to device-related codes on the CC list. In support of their position, the commenters cited our decision to keep the encephalopathy codes on the MCC list. They pointed out that the encephalopathy codes had C1 findings of a low of 1.5448 to a high of 2.3158 and C2 findings of a low of 2.5054 to a 51545 • 996.61 (Infection and inflammatory reaction due to internal prosthetic device, implant, and graft due to cardiac device, implant, and graft). Currently, all three diagnosis codes are classified as a CC. For the FY 2012 IPPS/LTCH PPS proposed rule, we analyzed claims data using the methodology described previously in this section for these diagnosis codes. The following chart shows our findings: Cnt 2 Impact Cnt 2 1,920 1,032 633 Cnt 3 2.4332 2.5190 2.8134 1,333 660 1,253 Cnt 3 Impact 3.1134 3.1508 3.5036 high of 3.0023, yet they were maintained on the MCC list. The commenters believed that the same logic should be applied to the mechanical complication and infection due to device-related codes which had C1 findings of a low of 1.6723 to a high of 1.9922 and C2 findings of a low of 2.4332 to a high of 2.8134. One commenter also offered data from the Healthcare Utilization Project (HCUP) database which showed 2008 national statistics of average costs for patients admitted with one of these codes as a principal diagnosis. This commenter stated that these data showed average costs as follows: 2008 NATIONAL STATISTICS—PRINCIPAL DIAGNOSIS ONLY RANKED BY COSTS, DESCENDING ORDER: MEDICARE ONLY ICD–9–CM Principal diagnosis code Total number of discharges mstockstill on DSK4VPTVN1PROD with RULES2 996.61—React-Cardiac Dev/Graft ................................................... 996.04—Mch Comp Aut, Mplnt Dfbri .............................................. 996.01—Malfunc Cardiac Pacemake .............................................. 427.5—Cardiac Arrest ..................................................................... 349.82—Toxic Encephalopathy ....................................................... 428.23—Ac On Chr Syst Hrt Fail .................................................... 428.1—Left Heart Failure ................................................................ 348.39—Encephalopathy Nec ......................................................... 428.31—Ac Diastolic Hrt Failure ..................................................... 348.30—Encephalopathy Nos ......................................................... 572.2—Hepatic encephalopathy ...................................................... The commenter stated that these data support changing these codes to the MCC list since the costs associated with these admissions were higher than admissions for encephalopathy. Response: We agree with the commenters who supported maintaining the current CC severity level for the mechanical complication and infection VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Length of stay (LOS) (mean) 8,944 8,095 8,664 4,781 6,835 75,511 2,261 4,880 37,216 11,057 20,154 due to device related codes. As discussed above the C1 and C2 findings as well as the advice of our clinical advisors supports this recommendation. We disagree with the commenters who made comparisons to our proposals for the encephalopathy codes. The encephalopathy codes had C1 findings of a low of 1.5448 to a high of 2.3158 PO 00000 Frm 00071 Fmt 4701 Sfmt 4700 Charges $ (mean) 10.7 3.2 2.8 3.6 6.5 5.8 5.1 6.3 5.5 5.9 5.4 95,251 59,924 37,056 35,499 37,913 33,732 26,777 32,124 30,167 31,933 28,056 Costs $ (mean) 26,893 16,891 11,044 10,908 10,765 10,689 10,252 9,609 9,298 9,232 8,580 and C2 findings of a low of 2.5054 to a high of 3.0023. The encephalopathy codes C1 findings supported a change to a CC level. The C2 findings of a high of 3.0023 support the current MCC assignment for those codes. The mechanical complication and infection due to device-related codes had C1 findings of a low of 1.6723 and E:\FR\FM\18AUR2.SGM 18AUR2 51546 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations a high of 1.9922, which are more like a CC than a non-CC but not as significant in resource usage as an MCC. The C2 findings of a low of 2.4332 and a high of 2.8134 are also supportive of a CC classification because, while one was a high of 2.8134, the other was only 2.4332. Only one of the codes had a finding that approached 3.0 and neither exceeded 3.0. Furthermore, our clinical advisors’ evaluation of data on patients with encephalopathy as a secondary diagnosis indicates that these patients are at a higher severity level. Our clinical advisors did not believe that patients who have one of the mechanical complication and infection due to device-related codes as a secondary diagnoses would require resources justifying the MCC severity level. We point out that the data that the commenter shared focused on patients admitted for either a mechanical complication or infection due to devicerelated code or for encephalopathy. In other words, these conditions were the principal diagnosis in this data. These cases did not report the codes as secondary diagnoses. Our clinical criteria are based on these conditions being reported as a secondary diagnosis and the effect that has on all types of admissions. A detailed discussion of the process and criteria we used in this process is described in the FY 2008 IPPS final rule with comment period (72 FR 47158 through 47161). It may well make a difference in the overall costs of the admission if a patient were admitted for these types of complications and required a pacemaker insertion during the stay. Clearly, the encephalopathy cases would not have had a device inserted. Therefore, it is not possible to determine the effect of the impact of these conditions as a secondary diagnosis based on these data because the additional costs of a device is included. Our approach isolates the effect of the individual code on all types of admissions when it is reported as a secondary diagnosis. It also looks at whether this code is the only CC or MCC reported (C1 cases), reported with another CC diagnosis (C2 cases), or reported with another MCC diagnosis (C3). We cannot determine what, if any, secondary diagnoses were present for the cases shown in the HCUP data shown above. We believe our consistent approach to evaluating the effect of a secondary diagnosis is more appropriate than looking at average costs when the condition is reported as a principal diagnosis in establishing the severity level of these codes. Modifying the approach by also looking at the principal diagnosis would significantly modify our current approach that focuses solely on evaluating the impact of secondary diagnoses on increasing the severity of the overall admission. We also note that our clinical advisors’ evaluation of these cases, who advised that the codes should remain on the CC lists, supports the findings of the data and maintaining the codes on the CC list. After consideration of the public comments we received, as we proposed, we are maintain the mechanical complication and infection due to device-related codes listed below on the CC list for FY 2012. • 996.01 (Mechanical of cardiac device, implant and graft due to cardiac pacemaker (electrode))—CC • 996.04 (Mechanical complication of cardiac device, implant, and graft due to automatic implantable cardiac defibrillator)—CC • 996.61 (Infection and inflammatory reaction due to internal prosthetic device, implant, and graft due to cardiac device, implant, and graft)—CC 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, 2011, 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: http: //www.cms.hhs.gov/AcuteInpatientPPS. Each of these principal diagnoses for which there is a CC exclusion is shown in Tables 6G and 6H, which are listed in section VI. of the Addendum to this final rule (and available via the Internet) 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/AcuteIn patientPPS. Beginning with discharges on or after October 1, 2011, the indented diagnoses will not be 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 occurred as a result of updates to the ICD–9–CM codes, as described in Tables 6A, 6C, and 6E, which are listed in section VI. of the Addendum to this final rule and available via the Internet, we are providing the following summaries of those MCC and CC changes for FY 2012. SUMMARY OF ADDITIONS TO THE MS–DRG MCC LIST—TABLE 6I.1 mstockstill on DSK4VPTVN1PROD with RULES2 Code Description 284.11 ........................ 284.12 ........................ 348.82 ........................ 415.13 ........................ 444.01 ........................ 488.81 ........................ 516.4 .......................... 516.61 ........................ 516.62 ........................ 516.63 ........................ 516.64 ........................ 516.69 ........................ 518.51 ........................ 518.52 ........................ 518.53 ........................ 747.31 ........................ 747.32 ........................ 747.39 ........................ 808.54 ........................ 998.01 ........................ VerDate Mar<15>2010 Antineoplastic chemotherapy induced pancytopenia. Other drug-induced pancytopenia. Brain death. Saddle embolus of pulmonary artery. Saddle embolus of abdominal aorta. Influenza due to identified novel influenza A virus with pneumonia. Lymphangioleiomyomatosis. Neuroendocrine cell hyperplasia of infancy. Pulmonary interstitial glycogenosis. Surfactant mutations of the lung. Alveolar capillary dysplasia with vein misalignment. Other interstitial lung diseases of childhood. Acute respiratory failure following trauma and surgery. Other pulmonary insufficiency, not elsewhere classified, following trauma and surgery. Acute and chronic respiratory failure following trauma and surgery. Pulmonary artery coarctation and atresia. Pulmonary arteriovenous malformation. Other anomalies of pulmonary artery and pulmonary circulation. Multiple open pelvic fractures without disruption of pelvic circle. Postoperative shock, cardiogenic. 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations SUMMARY OF ADDITIONS TO THE MS–DRG MCC LIST—TABLE 6I.1—Continued Code Description 998.02 ........................ 998.09 ........................ Postoperative shock, septic. Postoperative shock, other. SUMMARY OF DELETIONS FROM THE MS–DRG MCC LIST—TABLE 6I.2 Code Description 518.5 .......................... 747.3 .......................... Pulmonary insufficiency following trauma and surgery. Anomalies of pulmonary artery. SUMMARY OF ADDITIONS TO THE MS–DRG CC LIST—TABLE 6J.1 Code Description 284.19 ........................ 286.52 ........................ 286.53 ........................ 286.59 ........................ 294.21 ........................ 358.30 ........................ 358.31 ........................ 358.39 ........................ 425.11 ........................ 425.18 ........................ 444.09 ........................ 512.2 .......................... 512.81 ........................ 512.82 ........................ 512.83 ........................ 512.84 ........................ 512.89 ........................ 516.33 ........................ 516.35 ........................ 516.36 ........................ 516.37 ........................ 516.5 .......................... 539.01 ........................ 539.09 ........................ 539.81 ........................ 539.89 ........................ 596.81 ........................ 596.82 ........................ 596.83 ........................ 808.44 ........................ 996.88 ........................ 997.32 ........................ 997.41 ........................ 997.49 ........................ 998.00 ........................ 999.32 ........................ 999.33 ........................ 999.34 ........................ 999.41 ........................ 999.42 ........................ 999.49 ........................ 999.51 ........................ 999.52 ........................ 999.59 ........................ Other pancytopenia. Acquired hemophilia. Antiphospholipid antibody with hemorrhagic disorder. Other hemorrhagic disorder due to intrinsic circulating anticoagulants, antibodies, or inhibitors. Dementia, unspecified, with behavioral disturbance. Lambert-Eaton syndrome, unspecified. Lambert-Eaton syndrome in neoplastic disease. Lambert-Eaton syndrome in other diseases classified elsewhere. Hypertrophic obstructive cardiomyopathy. Other hypertrophic cardiomyopathy. Other arterial embolism and thrombosis of abdominal aorta. Postoperative air leak. Primary spontaneous pneumothorax. Secondary spontaneous pneumothorax. Chronic pneumothorax. Other air leak. Other pneumothorax. Acute interstitial pneumonitis. Idiopathic lymphoid interstitial pneumonia. Cryptogenic organizing pneumonia. Desquamative interstitial pneumonia. Adult pulmonary Langerhans cell histiocytosis. Infection due to gastric band procedure. Other complications of gastric band procedure. Infection due to other bariatric procedure. Other complications of other bariatric procedure. Infection of cystostomy. Mechanical complication of cystostomy. Other complication of cystostomy. Multiple closed pelvic fractures without disruption of pelvic circle. Complications of transplanted organ, stem cell. Postprocedural aspiration pneumonia. Retained cholelithiasis following cholecystectomy. Other digestive system complications. Postoperative shock, unspecified. Bloodstream infection due to central venous catheter. Local infection due to central venous catheter. Acute infection following transfusion, infusion, or injection of blood and blood products. Anaphylactic reaction due to administration of blood and blood products. Anaphylactic reaction due to vaccination. Anaphylactic reaction due to other serum. Other serum reaction due to administration of blood and blood products. Other serum reaction due to vaccination. Other serum reaction. mstockstill on DSK4VPTVN1PROD with RULES2 SUMMARY OF DELETIONS FROM THE MS–DRG CC LIST—TABLE 6J.2 Code 284.1 286.5 425.1 444.0 512.8 516.3 Description .......................... .......................... .......................... .......................... .......................... .......................... VerDate Mar<15>2010 Pancytopenia. Hemorrhagic disorder due to intrinsic circulating anticoagulants. Hypertrophic obstructive cardiomyopathy. Embolism and thrombosis of abdominal aorta. Other spontaneous pneumothorax. Idiopathic fibrosing alveolitis. 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00073 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 51547 51548 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations SUMMARY OF DELETIONS FROM THE MS–DRG CC LIST—TABLE 6J.2—Continued Code 997.4 998.0 999.4 999.5 Description .......................... .......................... .......................... .......................... Digestive system complications. Postoperative shock. Anaphylactic shock due to serum. Other serum reaction. mstockstill on DSK4VPTVN1PROD with RULES2 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 28.0, is available on a CD for $225.00. Version 29.0 of this manual, which will include the final FY 2012 MS–DRG changes, will be available on a CD 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. 12. 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 cases not occurring with sufficient frequency to represent a distinct, recognizable clinical group. MS–DRGs 984 through 986 (previously CMS DRG 476) are assigned to those discharges in which one or more of the following prostatic procedures are performed and are unrelated to the principal diagnosis: • 60.0, Incision of prostate • 60.12, Open biopsy of prostate • 60.15, Biopsy of periprostatic tissue • 60.18, Other diagnostic procedures on prostate and periprostatic tissue • 60.21, Transurethral prostatectomy • 60.29, Other transurethral prostatectomy • 60.61, Local excision of lesion of prostate • 60.69, Prostatectomy, not elsewhere classified • 60.81, Incision of periprostatic tissue • 60.82, Excision of periprostatic tissue • 60.93, Repair of prostate • 60.94, Control of (postoperative) hemorrhage of prostate • 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 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. PO 00000 Frm 00074 Fmt 4701 Sfmt 4700 Our review of MedPAR claims data showed that there were no cases that merited movement or should logically be assigned to any of the other MDCs. Therefore, for FY 2012, we did not propose to change the procedures assigned among these MS–DRGs. We did not receive any public comments on this proposal. Therefore, as we proposed, we are not making any changes to the procedures assigned to MS–DRGs 981 through 983, 984 through 986, and 987 through 989 for FY 2012. 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 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, FY 2010, and FY 2011, 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), the FY 2010 final rule (74 FR 43796); and the FY 2011 final rule (75 FR 50122). E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations which the diagnosis falls. As noted above, there were no cases that merited movement or that should logically be assigned to any of the other MDCs. Therefore, for FY 2012, 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. Therefore, as we proposed, we are not making any changes to the procedures assigned to MS–DRGs 981 through 983 or 987 through 989 for FY 2012. b. Reassignment of Procedures Among MS–DRGs 981 Through 983, 984 Through 986, and 987 Through 989 mstockstill on DSK4VPTVN1PROD with RULES2 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. There were no cases representing shifts in treatment practice or reporting practice that would make the resulting MS–DRG assignment illogical, or that merited movement so that cases should logically be assigned to any of the other MDCs. Therefore, for FY 2012, we did not propose to move any procedure codes among these MS–DRGs. We did not receive any public comments on our proposal. Therefore, as we proposed, we are not moving any procedures assigned to MS–DRGs 981 through 983, 984 through 986, and 987 through 989 for FY 2012. c. Adding Diagnosis or Procedure Codes to MDCs Based on the review of cases in the MDCs as described above in sections III.G.12.a. and b., we did not propose to add any diagnosis or procedure codes to MDCs for FY 2012. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 We did not receive any public comments on our proposal. Therefore, as we proposed, we are not adding any diagnosis or procedure codes to MDCs for FY 2012. 13. 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 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 PO 00000 Frm 00075 Fmt 4701 Sfmt 4700 51549 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 2012 at a public meeting held on September 15–16, 2010 and finalized the coding changes after consideration of comments received at the meetings and in writing by November 19, 2010. Those coding changes were announced in Tables 6A through 6F, which were listed in section VI. of the Addendum to the proposed rule and available via the Internet. The Committee held its 2011 meeting on March 9–10, 2011. New codes for which there was a consensus of public support and for which complete tabular and indexing changes were made by May 2011 are included in the October 1, 2011 update to ICD–9–CM. Code revisions that were discussed at the March 9–10, 2011 Committee meeting but that could not be finalized in time to include them in the tables listed in section VI. of the Addendum to the proposed rule are included in Tables 6A through 6F, which are listed in section VI. of the Addendum to this final rule and available via the Internet, and are marked with an asterisk (*). Copies of the minutes of the procedure codes discussions at the Committee’s September 15–16, 2010 meeting and March 9–10, 2011 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 15–16, 2010 meeting and March 9–10, 2011 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51550 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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, 2011. 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), which are listed in section VI. of the Addendum to this final rule and available via the Internet. 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 2012 IPPS/LTCH PPS proposed rule, we solicited comments on the proposed classification of these new codes, which were shown in Tables 6A and 6B listed in section VI. of the Addendum to the proposed rule and available via the Internet. Comment: Several commenters generally supported the proposed changes to the MS–DRG classifications. One commenter supported the non-CC designation for the following new diagnosis codes: 282.40 (Thalassemia, unspecified); 282.43 (Alpha thalassemia); code 282.44 (Beta thalassemia); 282.45 (Delta-beta thalassemia); 282.46 (Thalassemia minor); 282.47 (Hemoglobin E-beta Thalassemia); 516.31 (Idiopathic pulmonary fibrosis); 516.32 (Idiopathic non-specific interstitial pneumonitis); and 516.34 (Respiratory bronchiolitis interstitial lung disease). The commenter also supported the non-CC designation for and the assignment of code 573.5 (Hepatopulmonary syndrome) in MDC 4, MS–DRGs 205 and 206 (Other Respiratory System Diagnoses with and without MCC, respectively). However, the commenter did not support the non-CC designation of code 294.21 (Dementia, unspecified, with behavioral disturbance). The commenter VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 noted that a similar diagnosis with behavioral disturbance such as code 294.11 (Dementia in conditions classified elsewhere with behavioral disturbance) is designated as a CC and questioned why the same logic had not been considered for code 294.21. Response: Our medical advisors agree with the commenter’s assessment that diagnosis code 294.21 should qualify as a CC, similar to code 294.11. Both codes identify dementia with behavioral disturbance and use similar resource use. Therefore, in this final rule, we are changing the proposed non-CC designation for code 294.21 and classifying it as a CC in Table 6A. This change is reflected in Table 6A of this final rule which is available via the Internet on the CMS Web site. Comment: One commenter did not support the non-CC designation for diagnosis code 414.4 (Coronary atherosclerosis due to calcified coronary lesion). The commenter stated that this code should be designated as a CC, the same designation assigned to diagnosis code 414.02 (Coronary atherosclerosis of autologous vein bypass graft) and diagnosis code 414.03 (Coronary atherosclerosis of nonautologous biological bypass graft). Response: Our medical advisors do not agree with the commenter. According to our medical advisors, diagnosis code 414.4 is similar to code 414.01 (Coronary atherosclerosis of native coronary artery) which is not designated as a CC. Both codes indicate general atherosclerosis and are not similar to codes 414.02 and 414.03, which indicate atherosclerosis of an artery that has been replaced by graft. Therefore, we are not making any modifications to the proposed non-CC designation for code 414.4. Comment: One commenter supported the CC designation for the following diagnosis codes: 425.11(Hypertrophic obstructive cardiomyopathy); 425.18 (Other hypertrophic cardiomyopathy); 512.2 (Postoperative air leak); 512.81 (Primary spontaneous pneumothorax); 512.82 (Secondary spontaneous pneumothorax); 512.83 (Chronic pneumothorax); 512.84 (Other air leak); 512.89 (Other pneumothorax); 516.35 (Idiopathic lymphoid interstitial pneumonia); 516.36 (Cryptogenic organizing pneumonia); and 516.37 (Desquamative interstitial pneumonia). Some commenters supported the CC designations for code 998.00 (Postoperative shock, unspecified). One commenter representing a national medical specialty society for neurology supported our proposed CC designations for codes 358.30 (LambertEaton syndrome, unspecified); 358.31 PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 (Lambert-Eaton syndrome in neoplastic disease); and 358.39 (Lambert-Eaton syndrome in other diseases classified elsewhere). The commenter stated that Lambert-Eaton syndrome is increasingly diagnosed and not always a paraneoplastic syndrome. One commenter supported the CC designation for code 348.82 (Brain death), while another commenter did not support this proposed designation. The commenter that did not support the proposal stated that this code should be designated as an MCC. Response: Our medical advisors agree with the commenter that code 348.82 should be designated as a MCC because this diagnosis requires extensive intensive care resources. Therefore, in this final rule, we are amending the proposed CC designation of code 348.82 (Brain death) to MCC for FY 2012 in Table 6A. This change is reflected in Table 6A in this final rule which is available via the Internet on the CMS Web site. Comment: One commenter did not support the CC designation for code 516.30 (Idiopathic interstitial pneumonia, not other specified). The commenter did not see the differences among codes 516.30, 516.31 (Idiopathis pulmonary fibrosis), and 516.32 (Idiopathic nonspecific interstitial pneumonitis), recognizing that the nonspecific code is designated as a CC while the more specific codes are not designated as CCs. Response: We agree with the commenter that code 516.30 should not be designated as a CC because this code identifies an unspecified pneumonia which is more reflective of a non-CC. Therefore, in this final rule, we are amending the proposed CC designation for of code 516.30 (Idiopathic interstitial pneumonia, not other specified) to nonCC for FY 2012 in Table 6A. This change is reflected in Table 6A, which, for this final rule, is available via the Internet on the CMS Web site. Comment: Several commenters supported the MCC designation for the following diagnosis codes: 284.11 (Antineoplastic chemotherapy induced pancytopenia); 284.12 (Other drug induced pancytopenia); 488.81(Influenza due to identified novel influenza A virus with pneumonia); 998.01 (Postoperative shock, cardiogenic); 998.02 (Postoperative shock, septic); and 998.09 (Postoperative shock, other). In addition, one commenter supported the MCC designation for the following diagnosis codes: 518.51 (Acute respiratory failure following trauma and surgery); 518.52 (Other pulmonary insufficiency, not elsewhere classified); E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations and 518.53 (Acute and chronic respiratory failure following trauma and surgery). Response: We appreciate the commenters’ support. Comment: One commenter representing a national organization for orthopedic surgeons did not support the proposed MCC designation for diagnosis code 415.13 (Saddle embolus of pulmonary artery). The commenter stated that this designation is clinically inaccurate as a saddle embolus is a subcategory of deep vein thrombosis/ pulmonary embolism. Response: Our medical advisors do not agree with the commenter’s assessment that this diagnosis code does not warrant an MCC designation. The diagnosis of saddle embolus is lifethreatening, requiring intensive care resources. Therefore, we are not making any modifications to the proposed MCC designation for code 415.13. We point out that diagnosis codes 415.11 (Iatrogenic pulmonary embolism and infarction), 415.12 (Septic pulmonary embolism) and 415.19 (Other Pulmonary embolism and infarction) are designated as MCCs. Comment: One commenter suggested that, as new codes are added to the MS– DRG classification, the new codes be assigned to the same MS–DRG classification as its predecessor code. Response: CMS’ longstanding practice has been, where possible, to assign new ICD–9–CM codes to the same MS– DRGs(s) as their predecessor code. Comment: One commenter supported the proposed MS–DRG assignment to MS–DRG 264 (Other Circulatory System O.R. Procedures) for procedure code 38.26 (Insertion of implantable pressure sensor without lead for intracardiac or great vessel hemodynamic monitoring). Another commenter supported the surgical classification of procedure code 68.24 (Uterine artery embolization [UAE] with coils) and code 68.25 (Uterine artery embolization [UAE] without coils). Response: We appreciate the support of the commenters. For codes that have been replaced by new or expanded codes, the corresponding new or expanded diagnosis codes are included in Table 6A, which is listed in section VI. of the Addendum to this final rule and available via the Internet. New procedure codes are shown in Table 6B, which is listed in section VI. of the Addendum to this final rule and available via the Internet. Diagnosis codes that have been replaced by expanded codes or other codes or have been deleted are in Table 6C (Invalid Diagnosis Codes), which is listed in VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 section VI. of the Addendum to this final rule and available via the Internet. These invalid diagnosis codes will not be recognized by the GROUPER beginning with discharges occurring on or after October 1, 2011. Table 6D, which is listed in section VI. of the Addendum to this final rule and available via the Internet, contains invalid procedure codes. These invalid procedure codes will not be recognized by the GROUPER beginning with discharges occurring on or after October 1, 2011. Revisions to diagnosis code titles are in Table 6E (Revised Diagnosis Code Titles), which is listed in section VI. of the Addendum to this final rule and available via the Internet, and also includes the MS–DRG assignments for these revised codes. Table 6F, which is listed in section VI. of the Addendum to this final rule and available via the Internet includes revised procedure code titles for FY 2012. 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, 2011 Committee meeting that received consensus and that were finalized by May 2011 are included in Tables 6A through 6F, which are listed in section VI. of the Addendum to this final rule and available via the Internet. 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 PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 51551 diagnosis and procedure codes on April 1 of each year shall not require the Secretary to adjust the payment, or DRG classification, under section 1886(d) of the Act until the fiscal year that begins after such date, we have to update the DRG software and other systems in order to recognize and accept the new codes. We also publicize the code changes and the need for a mid-year systems update by providers to identify the new codes. Hospitals also have to obtain the new code books and encoder updates, and make other system changes in order to identify and report the new codes. The ICD–9–CM Coordination and Maintenance Committee holds its meetings in the spring and fall in order to update the codes and the applicable payment and reporting systems by October 1 of each year. Items are placed on the agenda for the ICD–9–CM Coordination and Maintenance Committee meeting if the request is received at least 2 months prior to the meeting. This requirement allows time for staff to review and research the coding issues and prepare material for discussion at the meeting. It also allows time for the topic to be publicized in meeting announcements in the Federal Register as well as on the CMS Web site. The public decides whether or not to attend the meeting based on the topics listed on the agenda. Final decisions on code title revisions are currently made by March 1 so that these titles can be included in the IPPS proposed rule. A complete addendum describing details of all changes to ICD–9–CM, both tabular and index, is published on the CMS and NCHS Web sites in May of each year. Publishers of coding books and software use this information to modify their products that are used by health care providers. This 5-month time period has proved to be necessary for hospitals and other providers to update their systems. A discussion of this timeline and the need for changes are included in the December 4–5, 2005 ICD–9–CM Coordination and Maintenance Committee minutes. The public agreed that there was a need to hold the fall meetings earlier, in September or October, in order to meet the new implementation dates. The public provided comment that additional time would be needed to update hospital 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) E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51552 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations of Public Law 108–173, by developing a mechanism for approving, in time for the April update, diagnosis and procedure code revisions needed to describe new technologies and medical services for purposes of the new technology add-on payment process. We also established the following process for making these determinations. Topics considered during the Fall ICD–9–CM Coordination and Maintenance Committee meeting are considered for an April 1 update if a strong and convincing case is made by the requester at the Committee’s public meeting. The request must identify the reason why a new code is needed in April for purposes of the new technology process. The participants at the meeting and those reviewing the Committee meeting summary report are provided the opportunity to comment on this expedited request. All other topics are considered for the October 1 update. Participants at the Committee meeting are encouraged to comment on all such requests. There were no requests approved for an expedited April l, 2011 implementation of an ICD– 9–CM code at the September 15–16, 2010 Committee meeting. Therefore, there were no new ICD–9–CM codes implemented on April 1, 2011. 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 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, we indicated that the issue of consideration PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 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. The code freeze was discussed at multiple meetings of the ICD–9–CM Coordination and Maintenance Committee and public comment was actively solicited. The Committee evaluated all comments from participants attending the Committee meetings as well as written comments that were received. There was an announcement at the September 15–16, 2010 ICD–9–CM Coordination and Maintenance Committee meeting that a partial freeze of both ICD–9–CM and ICD–10 codes would be implemented as follows: • The last regular annual update to both ICD–9–CM and ICD–10 code sets will be made on October 1, 2011. • On October 1, 2012, there will be only limited code updates to both ICD– 9–CM and ICD–10 code sets to capture new technology and new diseases. • There will be no updates to ICD–9– CM on October 1, 2013, as the system will no longer be a HIPAA standard. There will be only limited code updates to ICD–10 code sets on October 1, 2013, to capture new technology and new diseases. • On October 1, 2014, regular updates to ICD–10 will begin. The ICD–9–CM Coordination and Maintenance Committee announced that it would continue to meet twice a year during the freeze. At these meetings, the public will be encouraged to comment on whether or not requests for new diagnosis and procedure codes should be created based on the need to capture new technology and new diseases. Any code requests that do not meet the criteria will be evaluated for implementation within ICD–10 on or after October 1, 2014, once the partial freeze is ended. Complete information on the partial code freeze and discussions of the issues at the Committee meetings can be found on the ICD–9–CM Coordination and Maintenance Committee Web site at: https://www.cms.gov/ ICD9ProviderDiagnosticCodes/03. A summary of the September 15–16, 2010 Committee meeting, along with both written and audio transcripts of this meeting, are posted on the ‘‘Download’’ section of this Web page. Comment: Several commenters supported the partial code freeze. The commenters stated that the partial freeze was needed to allow providers time to prepare for the implementation of ICD– E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 10 and the accompanying system and product updates. Response: We appreciate the commenters’ support. We agree with the commenters that the partial code freeze will be useful in providing a greater opportunity to focus on ICD–10 implementation issues. mstockstill on DSK4VPTVN1PROD with RULES2 c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on Hospital Inpatient Claims In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50127), we discussed that we had received repeated requests from the hospital community to process all 25 diagnosis codes and 25 procedure codes submitted on electronic hospital inpatient claims. Prior to January 1, 2011, hospitals could submit up to 25 diagnoses and 25 procedures; however, CMS’ system limitations allowed for the processing of only the first 9 diagnoses and 6 procedures. We indicated in that final rule that, as part of our efforts to update Medicare systems prior to the implementation of ICD–10 on October 1, 2013, we were undergoing extensive system updates as part of the move to 5010, which includes the ability to accept ICD–10 codes. This complicated transition involved converting many internal systems prior to October 1, 2013, when ICD–10 will be implemented. We stated that, as one important step in this planned conversion process, we were planning to complete the expansion of our 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 HIPAA ASC X12 Technical Reports Type 3, Version 005010 (Version 5010) standards system update. We have completed this expansion, and, as a result, we were able to process up to 25 diagnosis codes and 25 procedure codes when received on the 5010 format starting on January 1, 2011. (We note that we made a typographical error in the proposed rule (76 FR 25843) and indicated that ‘‘we have not completed this expansion.’’ This error was pointed out to us by several commenters. We corrected this typographical error in a correction notice issued in the Federal Register on June 14, 2011 (76 FR 24633).) We continue to 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 process up to 25 diagnosis codes and 25 procedure codes when received on the 5010 format. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 d. ICD–10 MS–DRGs In response to the FY 2011 IPPS/ LTCH PPS proposed rule, 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 (75 FR 50127 and 50128). While we did not propose an ICD–10 version of the MS–DRGs in the FY 2011 IPPS/LTCH PPS proposed rule, we noted that we have 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. We 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 the CMS Web site at: https://www.cms.gov/ ICD10/17_ICD10_MS_DRG_Conversion_ Project.asp. We have continued 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/ ICD9ProviderDiagnosticCodes/ 03_meetings.asp. During FY 2011, we developed and posted Version 28.0 of the ICD–10 MS– DRGs based on the FY 2011 MS–DRGs (Version 28.0) that we finalized in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD–10 MS– DRG Version 28.0 also includes the CC Exclusion List and the ICD–10 version of the hospital acquired conditions (HACs), which was not posted with Version 26.0. We also discussed this update at the September 15–16, 2010 and the March 9–10, 2011 meetings of the ICD–9–CM Coordination and Maintenance Committee. The minutes of these two meetings are posted on the CMS Web site at: https://www.cms.gov/ ICD9ProviderDiagnosticCodes/03_ meetings.asp. 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, PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 51553 we will provide extensive and detailed information on this activity through the ICD–9–CM Coordination and Maintenance Committee. 14. Other Issues a. O.R./Non-O.R. Status of Procedures (1) Brachytherapy Code We received a request that we add ICD–9–CM procedure code 92.27 (Implantation or Insertion of Radioactive Elements) [Brachytherapy] into 41 MS–DRGs that are listed below: • 129 (Major Head and Neck Procedures with CC/MCC or Major Device) • 130 (Major Head and Neck Procedures without CC/MCC) • 163 (Major Chest Procedures with MCC) • 164 (Major Chest Procedures with CC) • 165 (Major Chest Procedures without CC/MCC) • 180 (Respiratory Neoplasms with MCC) • 181 (Respiratory Neoplasms with CC) • 182 (Respiratory Neoplasms without CC/MCC) • 326 (Stomach, Esophageal and Duodenal Procedures with MCC) • 327 (Stomach, Esophageal and Duodenal Procedures with CC) • 328 (Stomach, Esophageal and Duodenal Procedures without CC/ MCC) • 329 (Major Small and Large Bowel Procedures with MCC) • 330 (Major Small and Large Bowel Procedures with CC) • 331 (Major Small and Large Bowel Procedures without CC/MCC) • 332 (Rectal Resection with MCC) • 333 (Rectal Resection with CC) • 334 (Rectal Resection without CC/ MCC) • 344 (Minor Small and Large Bowel Procedures with MCC) • 345 (Minor Small and Large Bowel Procedures with CC) • 346 (Minor Small and Large Bowel Procedures without CC/MCC) • 347 (Anal and Stomal Procedures with MCC) • 348 (Anal and Stomal Procedures with CC) • 349 (Anal and Stomal Procedures without CC/MCC) • 405 (Pancreas, Liver and Shunt Procedures with MCC) • 406 (Pancreas, Liver and Shunt Procedures with CC) • 407 (Pancreas, Liver and Shunt Procedures without CC/MCC) • 490 (Back and Neck Procedures Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) • 491 (Back and Neck Procedures Except Spinal Fusion without CC/ MCC) E:\FR\FM\18AUR2.SGM 18AUR2 51554 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations • 500 (Soft Tissue procedures with MCC) • 501 (Soft Tissue procedures with CC) • 502 (Soft Tissue procedures without CC/MCC) • 584 (Breast Biopsy, Local Excision and Other Breast Procedures with CC/ MCC) • 585 (Breast Biopsy, Local Excision and Other Breast Procedures without CC/MCC) • 597 (Malignant Breast Disorders with MCC) • 598 (Malignant Breast Disorders with CC) • 599 (Malignant Breast Disorders without CC/MCC) • 653 (Major Bladder Procedures with MCC) • 654 (Major Bladder Procedures with CC) • 655 (Major Bladder Procedures without CC/MCC) • 656 (Kidney and Ureter Procedures for Neoplasm with MCC) • 657 (Kidney and Ureter Procedures for Neoplasm with CC) • 658 (Kidney and Ureter Procedures for Neoplasm without CC/MCC) • 662 (Minor Bladder Procedures with MCC) • 663 (Minor Bladder Procedures with CC) • 664 (Minor Bladder Procedures without CC/MCC) • 668 (Transurethral Procedures with MCC) • 669 (Transurethral Procedures with CC) • 670 (Transurethral Procedures without CC/MCC) • 671 (Urethral Procedures with CC/ MCC) • 672 (Urethral Procedures without CC/ MCC) • 707 (Major Male Pelvic Procedures with CC/MCC) • 708 (Major Male Pelvic Procedures without CC/MCC) • 736 (Uterine and Adnexa Procedures for Ovarian or Adnexal Malignancy with MCC) • 737 (Uterine and Adnexa Procedures for Ovarian or Adnexal Malignancy with CC) • 738 (Uterine and Adnexa Procedures for Ovarian or Adnexal Malignancy without CC/MCC) • 739 (Uterine and Adnexa Procedures for Nonovarian or Adnexal Malignancy with MCC) • 740 (Uterine and Adnexa Procedures for Nonovarian or Adnexal Malignancy with CC) • 741 (Uterine and Adnexa Procedures for Nonovarian or Adnexal Malignancy without CC/MCC) • 746 (Vagina, Cervix and Vulva Procedures with CC/MCC) • 747 (Vagina Cervix and Vulva Procedures without CC/MCC) • 748 (Female Reproductive System Reconstructive Procedures) • 749 (Other Female Reproductive System O.R. Procedures with CC/ MCC) • 750 (Other Female Reproductive System O.R. Procedures without CC/ MCC) For the FY 2012 IPPS/LTCH PPS proposed rule, we examined MedPAR claims data on this request and only found 150 cases throughout these MS– DRGs. Our findings are presented in the table below. MS–DRG with Code 92.27 Number of cases mstockstill on DSK4VPTVN1PROD with RULES2 DRG 129 130 163 164 165 180 181 182 326 327 328 329 330 331 332 333 334 344 345 346 347 348 349 405 406 407 490 491 500 501 502 584 585 597 598 599 653 654 655 ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 MS–DRG without Code 92.27 Jkt 223001 Average length of stay Average costs 6 2 17 52 41 0 0 0 0 1 0 1 2 0 1 1 1 0 0 0 0 0 0 1 2 0 0 0 0 5 5 0 0 0 0 0 ........................ ........................ 0 6.67 1.00 8.18 5.94 2.95 0 0 0 0 4.00 0 24.00 9.00 0 48.00 10.00 16.00 0 0 0 0 0 0 8.00 10.50 0 0 0 0 7.00 7.40 0 0 0 0 0 .......................... .......................... 0 $15,793 7,587 24,166 17,505 10,638 0 0 0 0 9,302 0 37,654 20,043 0 61,169 11,446 27,312 0 0 0 0 0 0 8,444 23,231 0 0 0 0 12,896 13,876 0 0 0 0 0 ........................ ........................ 0 PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 Number of cases 1,326 904 11,871 16,487 9,260 19,304 22,205 2,365 10,321 9,671 8,461 41,107 53,584 22,105 1,439 4,494 2,855 756 2,906 2,331 1,430 3,975 3,512 3,940 4,749 1,799 19,840 38,574 1,935 4,961 5,009 790 1,318 532 1,369 165 1,589 3,502 1,121 E:\FR\FM\18AUR2.SGM 18AUR2 Average length of stay Average costs 5.35 2.78 13.90 7.13 4.27 7.37 5.30 3.59 15.48 8.67 3.49 15.10 8.91 5.13 13.40 7.86 4.76 11.30 6.67 4.52 8.80 5.40 2.75 15.45 7.83 8.04 4.24 2.05 10.86 5.77 2.78 5.32 2.12 7.41 5.32 3.26 16.34 9.13 5.53 $14,400 7,860 31,860 16,865 11,754 11,396 8,014 5,580 35,437 17,889 9,161 33,003 16,736 10,654 29,727 16,008 10,518 21,590 11,190 7,757 16,644 9,326 5,311 35,970 17,333 12,148 11,940 6,794 20,600 10,256 6,844 11,126 7,283 10,990 7,624 4,368 35,856 19,367 413,162 51555 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations MS–DRG with Code 92.27 Number of cases DRG 656 657 658 662 663 664 668 669 670 671 672 707 708 736 737 738 739 740 741 746 747 748 749 750 ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... mstockstill on DSK4VPTVN1PROD with RULES2 We received a public comment that was outside of the scope of the FY 2011 IPPS/LTCH PPS proposed rule regarding the MS–DRG assignment for intraoperative electron radiation therapy Jkt 223001 Average costs 20.00 0 0 0 0 0 3.50 6.50 1.50 0 0 0 3.00 0 6.00 0 0 0 1.00 0 0 0 0 0 77,737 0 0 0 0 0 3,972 7,832 5,639 0 0 0 11,252 0 13,045 0 0 0 3,225 0 0 0 0 0 (IOERT). This issue was discussed briefly in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50128). However, we addressed this issue in the FY 2012 IPPS/LTCH PPS rulemaking. IOERT is the direct application of radiation to a tumor and/or tumor bed while the patient is undergoing surgery for cancer. This technology may be used for cancers of the rectum, head/neck, pancreas, lung, genitourinary, soft tissue, and breast. IOERT is a secondary procedure performed during the primary tumor removal surgery. The commenter requested that CMS update the MS–DRG assignments for procedure code 92.41 (Intraoperative electron radiation therapy) to ensure that 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. Currently, this code is not assigned to a specific MS–DRG as the primary procedure performed, the tumor removal, would determine the appropriate MS–DRG assignment. The commenter provided a recommended list of MS–DRGs to which IOERT should be assigned: MS– DRG Major Head and Neck Procedures with CC/MCC or Major Device. Major Head and Neck Procedures without CC/MCC. Other Ear, Nose, Mouth and Throat O,R, Procedures with CC/MCC. Number of cases 130 ....... 133 ....... PO 00000 Fmt 4701 Sfmt 4700 Average costs 10.00 5.63 3.25 10.21 2.18 1.86 8.99 4.25 2.24 5.45 2.31 4.26 1.80 13.18 6.49 3.47 10.18 4.34 2.31 3.97 1.72 1.67 8.58 2.88 24,022 13,345 9,718 19,455 9,729 7,457 16,852 8,398 5,158 9,778 5,575 12,080 8,572 29,827 13,348 7,966 23,070 10,214 7,438 8,504 5,995 6,285 16,781 7,116 MS– DRG Description 134 ....... Other Ear, Nose, Mouth and Throat O.R. Procedures without CC/MCC. Major Chest Procedures with MCC. Major Chest Procedures with CC. Major Chest Procedures without CC/MCC. Other Respiratory System O.R. Procedures with MCC. Other Respiratory System O.R. Procedures with CC. Other Respiratory System O.R. Procedures without CC/MCC. Stomach, Esophageal and Duodenal Procedures with MCC. Stomach, Esophageal and Duodenal Procedures with CC. Stomach, Esophageal and Duodenal Procedures without CC/ MCC. Major Small and Large Bowel Procedures with MCC. Major Small and Large Bowel Procedures with CC. Major Small and Large Bowel Procedures without CC/MCC. Rectal Resection with MCC. Rectal Resection with CC. Rectal Resection without CC/MCC. Minor Small and Large Bowel Procedures with MCC. Minor Small and Large Bowel Procedures with CC. Minor Small and Large Bowel Procedures without CC/MCC. Anal and Stomal Procedures with MCC. Anal and Stomal Procedures with CC. 163 ....... 164 ....... 165 ....... 166 ....... 167 ....... 168 ....... 326 ....... 327 ....... 328 ....... 329 ....... 330 ....... 331 ....... 332 333 334 344 ....... ....... ....... ....... 345 ....... Frm 00081 Average length of stay 3,110 7,885 6,150 763 1,818 2,705 2,908 13,776 7,321 746 613 4,719 14,329 775 2,844 642 790 3,914 4,917 2,282 6,243 14,682 920 285 Description 129 ....... (2) Intraoperative Electron Radiation Therapy (IOERT) 16:07 Aug 17, 2011 Average length of stay 1 0 0 0 0 0 2 4 2 0 0 0 1 0 1 0 0 0 1 0 0 0 0 0 The numbers of cases in any of the MS–DRGs listed were minimal. Many of the MS–DRGs listed had no occurrences of procedure code 92.27. The highest number of cases found was 52, in MS– DRG 164 (Major Chest Procedures with CC). Based on these findings, we do not believe that making a MS–DRG change based on such a minimal number of cases can be justified. Therefore, for FY 2012, we did not propose to add procedure code 92.27 to any of the 41 MS–DRGs listed above. Further, we did not propose any MS–DRG changes for procedure code 92.27. We welcomed public comment on our proposal not to make changes to procedure code 92.27. Comment: Several commenters supported our proposal to not add procedure code 92.27 to any of the 41 MS–DRGs listed above and to not propose any MS–DRG changes for procedure code 92.27. Response: We appreciate the commenters’ support. After consideration of the public comments we received, as we proposed, we are not adding procedure code 92.27 to any of the 41 MS–DRGs listed above and are not making any MS–DRG changes for procedure code 92.27 for FY 2012. VerDate Mar<15>2010 MS–DRG without Code 92.27 346 ....... 347 ....... 348 ....... E:\FR\FM\18AUR2.SGM 18AUR2 51556 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations MS– DRG Description MS– DRG Description 349 ....... Anal and Stomal Procedures without CC/MCC. Other Digestive System O.R. Procedures with MCC. Other Digestive System O.R. Procedures with CC. Other Digestive System O.R. Procedures without CC/MCC. Pancreas, Liver and Shunt Procedures with MCC. Pancreas, Liver and Shunt Procedures with CC. Pancreas, Liver and Shunt Procedures without CC/MCC. Back and Neck Procedures Except Spinal Fusion with CC/MCC. Back and Neck Procedures Except Spinal Fusion without CC/MCC. Soft Tissue Procedures with MCC. Soft Tissue Procedures with CC. Soft Tissue Procedures without CC/MCC. Other Skin, Subcutaneous Tissue and Breast Procedures with MCC. Other Skin, Subcutaneous Tissue and Breast Procedures with CC. Other Skin, Subcutaneous Tissue and Breast Procedures without CC/MCC. Breast Biopsy, Local Excision and Other Breast Procedures with CC/MCC. Breast Biopsy, Local Excision and Other Breast Procedures without CC/MCC. Major Bladder Procedures with MCC. Major Bladder Procedures with CC. Major Bladder Procedures without CC/MCC. Kidney and Ureter Procedures For Neoplasm with MCC. Kidney and Ureter Procedures For Neoplasm with CC. Kidney and Ureter Procedures for Neoplasm without MCC/CC. Minor Bladder Procedures with MCC. Minor Bladder Procedures with CC. Minor Bladder Procedures without CC/MCC. Transurethral Procedures with MCC. Transurethral Procedures with CC. Transurethral Procedures without CC/MCC. Urethral Procedures with CC/MCC. Urethral Procedures without CC/ MCC. Major Male Pelvic Procedures with CC/MCC. Major Male Pelvic Procedures without CC/MCC. Other Male Reproductive System O.R. Procedures For Malignancy with CC/MCC. Other Male Reproductive System O.R. Procedures For Malignancy without CC/MCC. 736 ....... Uterine and Adnexa Procedures for Ovarian or Adnexal Malignancy with MCC. Uterine and Adnexa Procedures for Ovarian or Adnexal Malignancy with CC. Uterine and Adnexa Procedures for Ovarian or Adnexal Malignancy without CC/MCC. Uterine and Adnexa Procedures for Nonovarian or Adnexal Malignancy with MCC. Uterine and Adnexa Procedures for Nonovarian or Adnexal Malignancy with CC. Uterine and Adnexa Procedures for Nonovarian or Adnexal Malignancy without CC/MCC. Vagina, Cervix and Vulva Procedures with CC/MCC. Vagina Cervix and Vulva Procedures without CC/MCC. Female Reproductive System Reconstructive Procedures. Other Female Reproductive System O.R. Procedures with CC/ MCC. Other Female Reproductive System O.R. Procedures without CC/MCC. 356 ....... 357 ....... 358 ....... 405 ....... 406 ....... 407 ....... 490 ....... 491 ....... 500 ....... 501 ....... 502 ....... 579 ....... 580 ....... 581 ....... 584 ....... 585 ....... 653 ....... 654 ....... 655 ....... 656 ....... 657 ....... 658 ....... 662 ....... 663 ....... 664 ....... 668 ....... 669 ....... 670 ....... 671 ....... 672 ....... mstockstill on DSK4VPTVN1PROD with RULES2 707 ....... 708 ....... 715 ....... 716 ....... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 737 ....... 738 ....... 739 ....... 740 ....... 741 ....... 746 ....... 747 ....... 748 ....... 749 ....... 750 ....... For the FY 2012 IPPS/LTCH PPS proposed rule, based on our review of the FY 2010 MedPAR claims data, we found a total of 12 cases with procedure code 92.41 reported. There were three cases assigned to MS–DRG 502; two cases each assigned to two different MS–DRGs: MS–DRG 333 and MS–DRG 501; and one case assigned each to five MS–DRGs: MS–DRGs 130, 168, 327, 329, and 330. The IOERT cases were assigned to an MS–DRG that included the tumor removal of that particular site, which was listed on the table above. Therefore, the cost of this technology is appropriately identified in the MS–DRG assignment for the removal of the tumor by specific site, and no change is warranted at this time. Therefore, we did not propose any changes to the assignment for IOERT cases for FY 2012. We invited public comment on our proposal to not change the assignment for IOERT cases for FY 2012. Comment: Several commenters supported our proposal to not make any MS–DRG modifications for FY 2012 for IOERT cases reported with procedure code 92.41. Response: We appreciate the commenters’ support. Based on our findings, these cases are appropriately assigned to the MS–DRG for the removal of the tumor by specific site and warrant no further modification. After consideration of the public comments we received, we are PO 00000 Frm 00082 Fmt 4701 Sfmt 4700 finalizing our proposal to not make any MS–DRG modifications for FY 2012 for intraoperative electron radiation therapy cases. b. IPPS Recalled Device Policy Clarification In the FY 2008 IPPS final rule with comment period (72 FR 47246 through 47251), we discussed the topic of Medicare payment for devices that are replaced without cost or where credit for a replaced device is furnished to the hospital. We implemented a policy to reduce a hospital’s IPPS payment for certain MS–DRGs where the implantation of a device that has been recalled determined the base MS–DRG assignment. At that time, we specified that we would reduce a hospital’s IPPS payment for those MS–DRGs where the hospital received a credit equal to 50 percent or more of the cost of the device when a manufacturer provided a credit for a recalled device. A similar policy was adopted under the Hospital Outpatient Prospective Payment System (OPPS) in CY 2008 (the ‘‘partial credit’’ policy). This policy can be viewed in its entirety at 72 FR 66743 though 66748. In general terms, under the partial credit policy, CMS reduces the amount of payment for an implanted device made under the OPPS for which CMS determines that a significant portion of the payment is attributable to the cost of an implanted device when the provider receives partial credit for the cost of a replaced device, but only where the amount of the device credit is greater than or equal to 50 percent of the cost of the new replacement device being implanted. It came to our attention that there is a discrepancy between the IPPS policy and the OPPS partial credit policy for replacement devices. In particular, the OPPS partial credit policy specifies that the credit must be 50 percent or greater of the cost of the replacement device. However, the IPPS policy does not specify whether the credit should be 50 percent or greater of the replacement device or the original device. We believe that the OPPS partial credit policy and the IPPS policy should be consistent with each other on the issue of whether the 50 percent or more credit is with respect to the replacement device or the original device. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to clarify the IPPS policy to state that the policy applies where ‘‘the hospital received a credit equal to 50 percent or more of the cost of the replacement device.’’ We invited public comment on this proposal. Comment: Several commenters approved of parallel policies for recalled E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations device credit for both the inpatient setting and the outpatient hospital setting. Response: We appreciate the commenters’ support. Comment: One commenter suggested additional clarifications. The commenter recommended that CMS reconcile condition codes 49 and 50 with the ‘‘FB’’ and ‘‘FC’’ modifiers from OPPS to include devices obtained at reduced or no cost for reasons other than those currently specified in condition codes 49 and 50. Condition code 49 addresses ‘‘product replacement within product lifecycle’’ while condition code 50 covers ‘‘product replacement for known recall of a product.’’ The commenter stated that, as currently defined, these two condition codes do not represent all of the reasons that devices are obtained at reduced or no cost and, therefore, create confusion as to when the device credit policy applies. The commenter added that, by comparison, in OPPS, modifier ‘‘FB’’ covers ‘‘devices that are obtained at no cost to the provider’’ and modifier ‘‘FC’’ covers ‘‘partial credit received for replaced device.’’ Further, the commenter stated, the definitions of the ‘‘FB’’ and ‘‘FC’’ modifiers denote whether the replacement device was obtained at no cost or reduced cost, and generally reflect all situations when the device credit policy would apply. As part of the clarification, the commenter suggested that CMS further explain whether value code ‘‘FD’’ as well as modifiers ‘‘FB’’ and ‘‘FC’’ are for ‘‘replacement’’ devices only. Response: We are not clear about the clarifications suggested by the commenter. The OPPS modifier ‘‘-FB’’ (Item Provided without Cost to Provider, Supplier or Practitioner) can be used to describe an item provided under warranty, replaced due to defect, or provided as a free sample. OPPS modifier ‘‘-FC’’ (Partial Credit Received for Replaced Device) describes cases in which the hospital receives a partial credit of 50 percent or more of the cost of a new replacement device under warranty, recall, or field action. Value code ‘‘FD’’ is used for Medicare Part A reporting of replacement devices. Hospitals must use the combination of condition code 49 or 50, described above, along with value code ‘‘FD’’ to correctly bill for a replacement device that was provided with a credit or no cost. Condition code 49 or 50 identifies a replacement device while value code ‘‘FD’’ communicates to Medicare the amount of the credit, or cost reduction, received by the hospital for the replaced device. We do not believe that hospitals find these reporting requirements VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 confusing. Regardless of the actual reason that a device is provided at no cost to a hospital or an ambulatory surgical center (ASC), the end result is that neither the hospital nor the ASC is incurring the full cost of the device, although the Medicare payment is calculated based on the full cost of the device. Comment: One commenter pointed out that the FY 2009 IPPS/LTCH PPS final rule (73 FR 48496) finalized an MS–DRG change by removing several procedure codes for AICD leads from MS–DRG 245 as well as revising the title of that MS–DRG to read ‘‘AICD Generator Procedures’’. New MS–DRG 265 (AICD Lead Procedures) was also created and included the AICD lead procedure codes that were transferred from MS–DRG 245. The commenter pointed out that CMS has not issued a new table through its transmittal process indicating that MS–DRG 265 should also be included in the list of MS–DRGs that are subject to the device recall policy. Response: We are aware of this oversight and have begun the process to create an updated Change Request to address this issue. We expect to issue the Change Request shortly. Comment: One commenter suggested that no-charge devices should be removed from the calculation of MS– DRG relative weights. Response: We appreciate this comment, but we point out that nocharge devices are not reported on claims. Therefore, charges for the device have not been included in the computation of the MS–DRG relative weights. After consideration of the public comments we received, we are finalizing our proposed clarification of the IPPS recalled device policy to state that the policy applies where ‘‘the hospital received a credit equal to 50 percent or more of the cost of the replacement device,’’ and we will issue instructions to hospitals accordingly. 15. Public Comments on Issues Not Addressed in the Proposed Rule We received a number of public comments regarding MS–DRG issues that were outside the scope of the proposals included in the FY 2012 IPPS/LTCH PPS proposed rule. We have summarized these public comments below. However, because these public comments were outside of the scope of the proposed rule, we are not addressing them in this final rule. As stated in section II.B.2. of this preamble, we encourage individuals with comments about MS–DRG classifications to submit these comments no later than December PO 00000 Frm 00083 Fmt 4701 Sfmt 4700 51557 of each year so they can be considered for possible inclusion in the annual proposed rule and, if included, may be subjected to public review and comment. We will consider these comments for possible proposals in future rulemaking as part of our annual review process. Commenters requested that CMS create new MS–DRGs for (1) disorders of porphyrin metabolism and (2) related and unrelated allogeneic bone marrow transplants. The commenters also requested that CMS create a new MS– DRG that would distinguish between ventricular assist device (VAD) implantation and heart transplants. Commenters requested that CMS evaluate the non-CC, CC, or MCC designation of the following codes: • 263.0 (Malnutrition of moderate degree) • 263.1 (Malnutrition of mild degree) • 263.9 (Unspecified protein-calorie malnutrition) • 285.3 (Antineoplastic chemotherapy induced anemia) • 425.4–425.9 (Cardiomyopathy) • 428.0 (Heart failure, unspecified) • 707.25 (Pressure ulcer, unstageable) One commenter recommended that CMS consider the reassignment of cases of patients diagnosed with influenza with pneumonia and who also have secondary diagnoses that would otherwise qualify the assignment of the cases to MS–DRGs 177 (Respiratory Infections and Inflammations with MCC), 178 (Respiratory Infections and Inflammations with CC), and 179 (Respiratory Infections and Inflammations without MCC/CC). The commenter recommended these cases be reassigned from MS–DRGs 193 (Simple Pneumonia and Pleurisy with MCC), 194 (Simple Pneumonia and Pleurisy with CC), and 195 (Simple Pneumonia and Pleurisy without MCC/CC) to MS– DRGs 177, 178, and 179. H. Recalibration of MS–DRG Weights In developing the FY 2012 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 2010 MedPAR data used in this final rule include discharges occurring on October 1, 2009, through September 30, 2010, based on bills received by CMS through March 31, 2011, from all hospitals subject to the IPPS and short-term, acute care hospitals in Maryland (which are under a waiver from the IPPS under section 1814(b)(3) of the Act). The FY 2010 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51558 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations MedPAR file used in calculating the relative weights includes data for approximately 10,836,723 Medicare discharges from IPPS providers. Discharges for Medicare beneficiaries enrolled in a Medicare Advantage managed care plan are excluded from this analysis. These discharges are excluded when the MedPAR ‘‘GHO Paid’’ indicator field on the claim record is equal to ‘‘1’’ or when the MedPAR DRG payment field, which represents the total payment for the claim, is equal to the MedPAR ‘‘Indirect Medical Education (IME)’’ payment field, indicating that the claim was an ‘‘IME only’’ claim submitted by a teaching hospital on behalf of a beneficiary enrolled in a Medicare Advantage managed care plan. In addition, the March 31, 2011 update of the FY 2010 MedPAR was updated to comply with version 5010 of the X12 HIPAA Transaction and Code Set Standards. The expansion of the MedPAR to the 5010 format includes a new variable called ‘‘claim type.’’ Claim type ‘‘60’’ indicates that the claim was an inpatient claim paid as fee-for-service. Claim types of ‘‘61,’’ ‘‘62,’’ ‘‘63,’’ and ‘‘64’’ relate to encounter claims, Medicare Advantage IME claims, and HMO nopay claims. Therefore, beginning with the calculation of the relative weights for FY 2012, we are also excluding claims with claim type values not equal to ‘‘60.’’ 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 cost-based relative weighting methodology is the FY 2009 Medicare cost report data files from HCRIS (that is, cost reports beginning on or after October 1, 2008, and before October 1, 2009), which represents the most recent full set of cost report data available. We used the March 31, 2011 update of the HCRIS cost report files for FY 2009 in setting the relative cost-based weights. The methodology we used to calculate the DRG cost-based relative weights from the FY 2010 MedPAR claims data and FY 2009 Medicare cost report data is as follows: • To the extent possible, all the claims were regrouped using the FY 2012 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 2010 MedPAR file. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 (Medicare coverage for heart, heart-lung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.) • Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis. Because these acquisition costs are paid separately from the prospective payment rate, it is necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average cost for each MS–DRG and before eliminating statistical outliers. • Claims with total charges or total 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 96.2 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), 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 PO 00000 Frm 00084 Fmt 4701 Sfmt 4700 (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 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 HAC cases 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 2009 cost report data. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 The 15 cost centers that we used in the relative weight calculation are shown in the following table. The table VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 shows the lines on the cost report and the corresponding revenue codes that PO 00000 we used to create the 15 national cost center CCRs. BILLING CODE 4120–01–P Frm 00085 Fmt 4701 Sfmt 4700 51559 E:\FR\FM\18AUR2.SGM 18AUR2 VerDate Mar<15>2010 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00086 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.003</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51560 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00087 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 51561 ER18AU11.004</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations VerDate Mar<15>2010 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00088 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.005</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51562 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00089 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 51563 ER18AU11.006</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations VerDate Mar<15>2010 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00090 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.007</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51564 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00091 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 51565 ER18AU11.008</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations VerDate Mar<15>2010 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00092 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.009</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51566 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00093 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 51567 ER18AU11.010</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations VerDate Mar<15>2010 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00094 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.011</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51568 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00095 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 51569 ER18AU11.012</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations BILLING CODE 4120–01–C VerDate Mar<15>2010 19:46 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00096 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.013</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51570 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations We developed the national average CCRs as follows: Taking the FY 2009 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 because we include their charges in our claims database. We then created CCRs for each provider for each cost center (see prior table for line items used in the calculations) and removed any CCRs that were greater than 10 or less than 0.01. We normalized the departmental CCRs by dividing the CCR for each department by the total CCR for the hospital for the purpose of trimming the data. We then took the logs of the normalized cost center CCRs and removed any cost center CCRs where the log of the cost center CCR was greater or less than the mean log plus/minus 3 times the standard deviation for the log of that cost center CCR. Once the cost report data were trimmed, we calculated a Medicare-specific CCR. The Medicarespecific CCR was determined by taking the Medicare charges for each line item from Worksheet D–4 and deriving the Medicare-specific costs by applying the hospital-specific departmental CCRs to the Medicare-specific charges for each line item from Worksheet D–4. Once each hospital’s Medicare-specific costs were established, we summed the total Medicare-specific costs and divided by the sum of the total Medicare-specific charges to produce national average, charge-weighted CCRs. After we multiplied the total charges for each MS–DRG in each of the 15 cost centers by the corresponding national average CCR, we summed the 15 ‘‘costs’’ across each MS–DRG to produce a total standardized cost for the MS–DRG. The average standardized cost for each MS– DRG was then computed as the total standardized cost for the MS–DRG divided by the transfer-adjusted case count for the MS–DRG. The average cost for each MS–DRG was then divided by 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 1.5808272736 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 2012 are as follows: FY 2012. Using the FY 2010 MedPAR data set, there were 8 MS–DRGs that contain fewer than 10 cases. Under the MS–DRGs, we have fewer low-volume DRGs than under the CMS DRGs because we no longer have separate DRGs for patients aged 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 aged 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 ................................ 0.525 applicable to their own patient Intensive Days .............................. 0.453 populations, we have heard frequent Drugs ............................................ 0.199 complaints from providers about the use Supplies & Equipment .................. 0.329 of the Medicare relative weights in the Therapy Services .......................... 0.380 pediatric population. We believe that Laboratory ..................................... 0.146 Operating Room ........................... 0.251 eliminating this age split in the MS– Cardiology ..................................... 0.155 DRGs will provide more stable payment Radiology ...................................... 0.140 for pediatric cases by determining their Emergency Room ......................... 0.236 payment using adult cases that are Blood and Blood Products ............ 0.402 much higher in total volume. Newborns Other Services .............................. 0.402 are unique and require separate MS– Labor & Delivery ........................... 0.454 Inhalation Therapy ........................ 0.191 DRGs that are not mirrored in the adult Anesthesia .................................... 0.116 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 2012, because we do not have sufficient MedPAR data to set system. When we recalibrated the DRG accurate and stable cost weights for weights for previous years, we set a these low-volume MS–DRGs, we threshold of 10 cases as the minimum proposed to compute weights for the number of cases required to compute a low-volume MS–DRGs by adjusting reasonable weight. In the FY 2012 IPPS/ their FY 2011 weights by the percentage LTCH PPS proposed rule, we proposed change in the average weight of the to use that same case threshold in cases in other MS–DRGs. The crosswalk recalibrating the MS–DRG weights for table is shown below: MS–DRG title 768 ................... 789 ................... Vaginal Delivery with O.R. Procedure Except Sterilization and/or D&C. Neonates, Died or Transferred to Another Acute Care Facility ......... 790 ................... Extreme Immaturity or Respiratory Distress Syndrome, Neonate ..... 791 ................... Prematurity with Major Problems ....................................................... 792 ................... mstockstill on DSK4VPTVN1PROD with RULES2 Low-volume MS–DRG Prematurity without Major Problems .................................................. 793 ................... Full-Term Neonate with Major Problems ........................................... 794 ................... Neonate with Other Significant Problems .......................................... 795 ................... Normal Newborn ................................................................................ VerDate Mar<15>2010 19:46 Aug 17, 2011 Jkt 223001 51571 PO 00000 Frm 00097 Crosswalk to MS–DRG Fmt 4701 Sfmt 4700 FY 2011 FR weight (adjusted by percent change erage weight of the cases in other MS–DRGs). FY 2011 FR weight (adjusted by percent change erage weight of the cases in other MS–DRGs). FY 2011 FR weight (adjusted by percent change erage weight of the cases in other MS–DRGs). FY 2011 FR weight (adjusted by percent change erage weight of the cases in other MS–DRGs). FY 2011 FR weight (adjusted by percent change erage weight of the cases in other MS–DRGs). FY 2011 FR weight (adjusted by percent change erage weight of the cases in other MS–DRGs). FY 2011 FR weight (adjusted by percent change erage weight of the cases in other MS–DRGs). FY 2011 FR weight (adjusted by percent change erage weight of the cases in other MS–DRGs). E:\FR\FM\18AUR2.SGM 18AUR2 in avin avin avin avin avin avin avin av- 51572 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations We did not receive any public comments on this section. Therefore, we are adopting the national average CCRs as proposed, with the MS–DRG weights recalibrated based on these CCRs. mstockstill on DSK4VPTVN1PROD with RULES2 I. Add-On Payments for New Services and Technologies 1. Background Sections 1886(d)(5)(K) and (L) of the Act establish a process of identifying and ensuring adequate payment for new medical services and technologies (sometimes collectively referred to in this section as ‘‘new technologies’’) under the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered new if it meets criteria established by the Secretary after notice and opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that 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 discharges occurring in 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 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 use of the medical service or technology are used to calculate the MS–DRG weights. For example, data from VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 discharges occurring during FY 2010 were used to calculate the FY 2012 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 2009 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, 2012 (the start of FY 2013). Because the FY 2013 MS–DRG weights would be calculated using FY 2011 MedPAR data, the costs of such a new technology would be fully reflected in the FY 2013 MS–DRG weights. Therefore, the new technology would no PO 00000 Frm 00098 Fmt 4701 Sfmt 4700 longer be eligible to receive add-on payments as a new technology for discharges occurring in FY 2013 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 technology would qualify for add-on payments (that is, the date of the ‘‘new’’ FDA approval or that of the prior E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 adopted a policy to 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 ineligible 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 1886(d)(5)(K)(ii)(I) of the Act to provide that, beginning in FY 2005, CMS will VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 apply ‘‘a threshold * * * that is the lesser of 75 percent of the standardized amount (increased to reflect the difference between cost and charges) or 75 percent of one standard deviation for the diagnosis-related group involved.’’ (We refer readers to section IV.D. of the preamble to the FY 2005 IPPS final rule (69 FR 49084) for a discussion of the revision of the regulations to incorporate the change made by section 503(b)(1) of Public Law 108–173.) Table 10 that was included in the IPPS/LTCH PPS final rule published in the Federal Register on August 16, 2010, contained the final thresholds that were used to evaluate applications for new technology add-on payments for this final rule for FY 2012 (75 FR 50605 through 50613). 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 Health Insurance Portability and Accountability Act (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 hospitals that would receive new technology add-on payments, are required to comply with the HIPAA Privacy Rule. We further explained how such entities could meet the applicable HIPAA requirements by discussing how the HIPAA Privacy Rule permitted providers to share with health plans information needed to ensure correct payment, if they had obtained consent from the patient to use that patient’s data for treatment, payment, or health care operations. We also explained that, because the information to be provided within applications for new technology add-on payment would be needed to ensure correct payment, no additional consent would be required. The HHS Office 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 PO 00000 Frm 00099 Fmt 4701 Sfmt 4700 51573 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 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 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 (that is, 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51574 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 longstanding practice of how CMS evaluates the eligibility criteria for new medical service or technology add-on payment applications. That is, we first determine whether a medical service or technology meets the newness criteria, and only if so, do we then make a determination as to whether the technology meets the cost threshold and represents a substantial clinical improvement over existing medical services or technologies. We also amended § 412.87(c) to specify that all applicants for new technology add-on payments must have FDA approval or clearance 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 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 high- VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 quality, 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.gov/ CouncilonTechInnov/Downloads/ InnovatorsGuide5_10_10.pdf. As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we invite any product developers or manufacturers of new medical technologies to contact the agency early in the process of product development if they have questions or concerns about the evidence that would be needed later in the development process for the agency’s coverage decisions for Medicare. The CTI aims to provide useful information on its activities and initiatives to stakeholders, including Medicare beneficiaries, advocates, medical product manufacturers, providers, and health policy experts. Stakeholders with further questions about Medicare’s coverage, coding, and payment processes, or who want further guidance about how they can navigate these processes, can contact the CTI at CTI@cms.hhs.gov. We note that applicants for add-on payments for new medical services or technologies for FY 2013 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 PO 00000 Frm 00100 Fmt 4701 Sfmt 4700 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 the CMS 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 2013, the Web site also will post the tracking forms completed by each applicant. Comment: A number of commenters submitted public comments that addressed topics relating to the substantial similarity criteria, marginal cost factor for the new technology addon payment, the use of external data in determining the cost threshold, paying new technology add-on 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 invite public comments nor propose to make any changes to any of the issues summarized above. Because these public 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 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 2012 prior to publication of the FY 2012 IPPS/LTCH PPS proposed rule, we published a notice in the Federal Register on November 29, 2010 (75 FR 73091 through 73094), and held a town hall meeting at the CMS Headquarters Office in Baltimore, MD, on February 2, 2011. 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 2012 new medical service and technology add-on payment applications before the publication of the FY 2012 proposed rule. Approximately 50 individuals registered to attend the town hall meeting in person, while additional individuals listened over an open telephone line. Each of the three FY 2012 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 2012 in the FY 2012 proposed rule and in this final rule. In response to the published notice and the new technology town hall meeting, we received three written comments regarding applications for FY 2012 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 proposed rule. We refer readers to the FY 2012 IPPS/LTCH PPS proposed rule for a complete iteration of the comments received in response to the published notice and the new technology town hall meeting and CMS’ responses (76 FR 25861 through 25863). VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 3. FY 2012 Status of Technologies Approved for FY 2011 Add-On Payments 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. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43819), the applicant stated that the first IRB approval for the Spiration® IBV® was March 12, 2009. In that final rule, based on the information above from the applicant, we determined that the Spiration® IBV® meets the newness criterion and the newness period for the Spiration® IBV® begins on March 12, 2009. 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 in response to the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, including the additional analysis of clinical data and PO 00000 Frm 00101 Fmt 4701 Sfmt 4700 51575 supporting information submitted by the applicant, we approved the Spiration® IBV® for new technology add-on payments for FY 2010 with a maximum add-on payment of $3,437.50. 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 continued new technology add-on payments for cases involving the Spiration® IBV® in FY 2011, with a maximum add-on payment of $3,437.50. The new technology add-on payment regulations provide 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’’ (42 CFR 412.87(b)(2)). Our practice has been to begin and end new technology add-on payments on the basis of a fiscal year, and we have generally followed a guideline that uses a 6-month window before and after the start of the fiscal year to determine whether to extend the new technology add-on payment for an additional 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). With regard to the newness criterion for the Spiration® IBV®, as stated above, we consider the beginning of the newness period for the device to have commenced on the date of the first IRB approval for the Spiration® IBV®, which was March 12, 2009. For FY 2012, as of March 12, 2012, the Spiration® IBV® will have been on the market for 3 years, and is therefore no longer considered ‘‘new’’ as of March 12, 2012. Because the 3-year anniversary date of the Spiration® IBV®’s entry onto the market will occur in the first half of the fiscal year, we proposed to discontinue its new technology add-on payment for FY 2012. Comment: One commenter requested that the new technology add-on payments for the Spiration® IBV® be extended for a third year. The commenter reasoned that, although two hospital IRBs approved the use of the Spiration® IBV®, those two hospitals did not implant the valve until June 2010 and September 2010, respectively. The commenter explained that there was a delay in the hospitals’ implantation of the device from the time of IRB approval due to the following E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51576 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations reasons: (1) Infrequent number of cases; and (2) the clinical, administrative, and operation processes that needed to be completed in order to make the technology available under HDE approval at each institution. Therefore, the commenter stated that even though a hospital would have received IRB approval, it would not expect the first case to be performed immediately. The commenter believed that for these reasons, the newness period should begin with the first implantation of the Spiration® IBV®, which occurred in June 2009. Using this date, the commenter determined that the newness period for the Spiration® IBV® would end June 2012, during the latter half of FY 2012, thus making the Spiration® IBV® eligible for a third year of new technology add-on payments. Response: CMS’ policy is that the newness period begins with the product’s or device’s FDA approval date, except in limited circumstances that could limit the availability of the product (69 FR 49002). In this case, the product was approved as an HDE, which included IRB approval as a requirement. Therefore, we determined that the date of IRB approval was the appropriate start date of the newness period (74 FR 43819). We do not agree that the start date for the newness period should be further adjusted if a hospital then decided not to immediately utilize the technology. In this case, the hospital’s IRB approved the product for use on March 12, 2009, and the product was available, but no patients had the product implanted until June 2010. We believe this is similar to a situation in which a technology is FDA approved (without any additional qualifications for use, such as IRB approval), but no hospital uses the technology for a period of time after FDA approval. In such a case, the newness period would still begin with FDA approval, and we would not delay the beginning of the newness period until a hospital uses the drug or device for the first time. Therefore, we disagree with the commenter, and we continue to believe it is appropriate to start the newness period for the Spiration® IBV® with the first IRB approval, which was March 12, 2009. As mentioned above, for FY 2012, as of March 12, 2012, the Spiration® IBV® will have been available for hospitals’ utilization for 3 years, and it is therefore no longer considered ‘‘new’’ as of March 12, 2012. Because this date occurs in the first half of the fiscal year, we are finalizing our proposal to discontinue its new technology add-on payment for FY 2012. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 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 final rule (73 FR 48555) that, because Medicare’s previous coverage policy with respect to this device had precluded payment from Medicare, we did not expect the costs associated with this technology to be currently reflected in the data used to determine the relative weights of MS–DRGs. As we have indicated in the past, and as we discussed in the FY 2009 IPPS final rule, although we generally believe that the newness period would begin on the date that FDA approval was granted, in cases where the applicant can demonstrate a documented delay in market availability subsequent to FDA approval, we would consider delaying the start of the newness period. This PO 00000 Frm 00102 Fmt 4701 Sfmt 4700 technology’s situation represented such a case. We also noted that section 1886(d)(5)(K)(ii)(II) of the Act requires that we provide for the collection of cost data for a new medical service or technology for a period of at least 2 years and no more than 3 years ‘‘beginning on the date on which an inpatient hospital code is issued with respect to the service or technology.’’ Furthermore, the statute specifies that the term ‘‘inpatient hospital code’’ means any code that is used with respect to inpatient hospital services for which payment may be made under the IPPS and includes ICD–9–CM codes and any subsequent revisions. Although the TAH-t has been described by the ICD– 9–CM code(s) since the time of its FDA approval, because the TAH-t had not been covered under the Medicare program (and, therefore, no Medicare payment had been made for this technology), this code could not be ‘‘used with respect to inpatient hospital services for which payment’’ is made under the IPPS, and thus we assumed that none of the costs associated with this technology would be reflected in the Medicare claims data used to recalibrate the MS–DRG relative weights for FY 2009. For this reason, as discussed in the FY 2009 IPPS final rule, despite the FDA approval date of the technology, we determined that 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 proposed rule, we approved the TAH-t for new technology add-on payments for FY 2009 (73 FR 48557). We also continued to make new technology add-on payments for the TAH-t in FY 2010 and FY 2011. We describe the new technology addon payment requirements with regard to newness above. With regard to the newness criterion for the TAH-t, as stated above, we consider the beginning of the newness period for the device to have commenced from the Medicare NCD date of May 1, 2008; it is no longer considered new as of May 11, 2011. Because the 3-year anniversary date of the TAH-t will occur prior to the start of FY 2012, we proposed to discontinue the new technology add-on payment for the TAH-t in FY 2012. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 We did not receive any public comments on this proposal. Therefore, we are finalizing our proposal to discontinue new technology add-on payments for the TAH-t in FY 2012. c. Auto Laser Interstitial Thermal Therapy (AutoLITTTM) System Monteris Medical submitted an application for new technology add-on payments for FY 2011 for the AutoLITTTM. 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 tissue of head and neck under guidance), which became effective on October 1, 2009. 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. After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology payments for the AutoLITTTM and consideration of the public comments we received in response to the FY 2011 IPPS/RY 2011 LTCH PPS proposed rule, including the additional analysis of clinical data and VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 supporting information submitted by the applicant, we approved the AutoLITTTM for new technology add-on payments for 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 limited the new technology add-on payment to cases involving the AutoLITTTM in MS– DRGs 025 (Craniotomy and Endovascular Intracranial Procedures with MCC), 026 (Craniotomy and Endovascular Intracranial Procedures with CC), and 027 (Craniotomy and Endovascular Intracranial Procedures without CC or MCC). Cases involving the AutoLITTTM that are eligible for the new technology add-on payment are identified by assignment to MS–DRGs 025, 026, and 027 with a procedure code of 17.61 (Laser interstitial thermotherapy of lesion or tissue of brain under guidance) in combination with a primary diagnosis codes that begins with a prefix of 191 (Malignant neoplasm of brain). We note that using the procedure and diagnosis codes above and restricting the add-on payment to cases that map to MS–DRGs 025, 026, and 027 is consistent with information provided by the applicant, which demonstrated that cases of the AutoLITTTM would only map to MS– DRGs 025, 026, and 027. Procedure code 17.62 (Laser interstitial thermotherapy of lesion or tissue of head and neck under guidance) does not map to MS– DRGs 025, 026, or 027 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. We describe the new technology addon payment requirements with regard to newness above. With regard to the newness criterion for the AutoLITTTM, as stated above, we consider the beginning of the newness period for the device to commence from the market release date of December 2009. Therefore, the device will be considered ‘‘new’’ until December 2012. Because the 3-year anniversary date for the AutoLITTTM will occur after FY 2012, we proposed to continue to make new technology add-on payments for the AutoLITTTM in FY 2012. We did not receive any public comments on this proposal. Therefore, PO 00000 Frm 00103 Fmt 4701 Sfmt 4700 51577 we are finalizing our proposal to continue to make new technology addon payments for the AutoLITTTM in FY 2012. The maximum add-on payment for a case involving the AutoLITTTM will continue to be $5,300 for FY 2012. 4. FY 2012 Applications for New Technology Add-On Payments We received three applications for new technology add-on payments for FY 2012. However, one applicant, the ChampionTM HF Monitoring System by CardioMems, Inc., withdrew its application after publication of the proposed rule because the applicant believed it would not receive FDA approval for its technology prior to the July 1 deadline, as required under § 412.87(c) of our regulations. Because the applicant withdrew its application, and we did not receive any public comments on this application, we are not discussing this application in this final rule. A discussion of the remaining two applications is presented below. a. AxiaLIF® 2L+TM System TranS1 submitted an application for new technology add-on payments for the AxiaLIF® 2L+TM System for FY 2012. The AxiaLIF® 2L+TM System is an implantable spinal fixation system, delivered through a pre-sacral approach, facilitating spinal fusion through axial stabilization of the anterior lumbar spine at Lumbar vertebrae 4 through Sacral vertebrae 1 (L4–S1). The AxiaLIF® 2L+TM System received 510K FDA clearance (K092124) on January 21, 2010, and the applicant asserts that the device was available on the market immediately afterward through a limited market release program. The AxiaLIF® 2L+TM System is indicated for use to provide anterior stabilization of the L4–S1 spinal segments as an adjunct to spinal fusion. It is also indicated for minimally invasive access to the anterior portion of the lower spine for assisting in the treatment of degeneration of the lumbar disc, performing lumbar discectomy, or for assistance in the performance of L4– S1 interbody fusion. The AxiaLIF® 2L+TM System may be used in patients requiring fusion to treat pseudoarthrosis, unsuccessful previous fusion, spinal stenosis, spondylolisthesis (Grade 1), or degenerative disc disease as defined as back pain of discogenic origin with degeneration of the disc confirmed by history and radiographic studies. The AxiaLIF® 2L+TM System is coded using ICD–9–CM procedure code 81.08 (Lumbar and lumbosacral fusion of the anterior column, posterior technique). In the FY 2012 IPPS/LTCH PPS proposed rule, we expressed numerous E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51578 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations concerns regarding the application for new technology add-on payments for the AxiaLIF® 2L+TM System. With regard to the newness criterion, we were concerned that the AxiaLIF® 2L+TM System may be substantially similar to the other devices manufactured by the applicant, AxiaLIF® System and AxiaLIF® IITM System, the latter of which is listed as the predicate device on the AxiaLIF® 2L+TM System’s application for FDA 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 outcome; (2) whether a product is assigned to the same or different 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. We were particularly concerned that the AxiaLIF® 2L+TMSystem uses the same or similar mechanism of action as the AxiaLIF® IITM System to achieve a therapeutic outcome. According to the applicant’s 510K summary submitted to the FDA (K073514), the AxiaLIF® System is a multicomponent system including titanium alloy implantable devices and instrumentation for creating a pre-sacral axial track to the L5–S1 disk space. Similarly, the AxiaLIF® IITM System is described in the applicant’s 510K summary submitted to the FDA (K073643) as a system of medical grade titanium alloy for the anterior stabilization of the L4–S1 spinal segments as an adjunct to spinal fusion. As we stated in the proposed rule, the applicant states that the AxiaLIF® 2L+TM System was created from the AxiaLIF® IITM System platform. The applicant submitted the following to distinguish the AxiaLIF® 2L+TM System from the AxiaLIF® IITM System: • There have been internal thread changes for the 2L+ implant to accompany the Spanning Distraction Rod, which is designed to create and hold distraction in the L5–S1 disc space and allow for a higher degree of control over the Rod advancement and distraction; • The design enhancements in the 2L+ System remove the dependence of distraction on size and placement of the S1 Rod, thus allowing precise implant placement in the vertebral bodies; • In the 2L+ Implant, the L4 section of the L4–L5 Rod incorporates a conical design to increase fixation. The outer diameter (O.D.) of the L5 section is increased to be identical to the O.D. of the S1 implant to provide more surface area bone contact; VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 • The 2L+ Instrumentation incorporates Dilator Trials as an opportunity to enhance and simplify the intraoperative measuring technique by providing a direct visual means of measurement; and • The 2L+ Fixation Rod fills the cannulation to prevent graft from moving into the rod from the disc space. The Fixation Rod also fixates the S1 Anchor and L4–L5 Rod together such that these components cannot passively separate. Based on indications for use listed by the FDA for the AxiaLIF® System (K073514), the AxiaLIF® IITM System (K073643), and the AxiaLIF® 2L+TM System (as described above), we also were concerned that all of these devices involve the treatment of the same or similar type of disease and the same or similar patient population. With respect to whether a product is assigned to the same or different DRG, we noted in the proposed rule that currently the AxiaLIF® System and the AxiaLIF® 2L+TM System both generally map to MS–DRGs 459 (Spinal Fusion Except Cervical with MCC) and 460 (Spinal Fusion Except Cervical without MCC). Though the AxiaLIF® IITM System is no longer on the market, it would also map to the same DRGs. If the AxiaLIF® 2L+TM System is found to be substantially similar to the AxiaLIF® System or the AxiaLIF® IITM System, the AxiaLIF® 2L+TM System would no longer qualify for the new technology add-on payment. Specifically, the appropriate start date for the AxiaLIF® 2L+TM System would be the start date of the device that is found to be substantially similar to the AxiaLIF® 2L+TM System. As noted above, the AxiaLIF® IITM System received FDA approval on April 28, 2008. The 3-year newness period for the AxiaLIF® IITM System ends prior to the start of FY 2012 (July 28, 2011). Given the length of time since the AxiaLIF® IITM System’s entry into the market, cost-related data for the AxiaLIF® IITM System is already reflected in the most recent MS–DRG relative weights. Additionally, the AxiaLIF® System received multiple FDA approvals, the most recent of which was on January 11, 2008. The 3-year newness period for the AxiaLIF® System also ends prior to the start of FY 2012 (January 11, 2011). Given the length of time since the AxiaLIF® System’s entry into the market, cost-related data for the AxiaLIF® System is already reflected in the most recent MS–DRG relative weights. However, if the AxiaLIF® 2L+TM System is not substantially similar to any of the predicate devices mentioned above, then the newness PO 00000 Frm 00104 Fmt 4701 Sfmt 4700 period for the AxiaLIF® 2L+TM System would begin on January 21, 2010 (the AxiaLIF® 2L+TM System’s FDA approval date) and would be within the year newness period for FY 2012. We invited public comment regarding whether or not the AxiaLIF® 2L+TM System meets the newness criteria, and, in particular, whether it is substantially similar to the AxiaLIF® System or the AxiaLIF® IITM System. We did not receive any public comments regarding the newness criteria or the substantial similarity of the AxiaLIF® 2L+TM System to the AxiaLIF® System or the AxiaLIF® IITM System. In the proposed rule, we also expressed concerns with the applicant’s methodology for demonstrating that it met the cost criterion. Specifically, in determining the projected standardized charge for the AxiaLIF® 2L+TM System, the applicant relied on a charge markup for defibrillators because it is also a high-cost implantable device for which a hospital purchase price is known. We were concerned about whether more direct data or different proxies are available, including a charge markup for the AxiaLIF® System or AxiaLIF® IITM System. In reviewing the applicant’s charge markup, we also were concerned about the source data for determining the 2.77 charge markup ratio for defibrillators. We invited public comment on whether the AxiaLIF® 2L+TM System meets the cost criterion for a new technology add-on payment for FY 2012. We did not receive any public comments that addressed our concerns regarding the cost criterion for new technology add-on payment. With respect to the substantial clinical improvement criterion, the applicant asserted that it meets this criterion in its application. The applicant stated that substantial clinical improvement is demonstrated by the AxiaLIF® 2L+TM System’s facilitation of spinal fusion surgery without a laparotomy. By avoiding a laparotomy, the AxiaLIF® 2L+TM System reduces blood loss, postoperative pain, narcotic use, denervation, morbidity, the probability of complications, and the risk of trauma to the tissue area surrounding the lumbar. The applicant further stated that the AxiaLIF® 2L+TM System reduces morbidity and has reduced risk of injuring vital organs and important intrinsic stabilizing structures, with a lower complication profile than traditional open fusion techniques. The applicant noted that long-term results can include better support of lordosis and prevention of adjacent level disease. In the proposed rule, we also expressed concern that this E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations does not demonstrate a substantial clinical improvement from the AxiaLIF® IITM System, which also facilitated spinal fusion surgery without a laparotomy. The applicant has not conducted clinical trials, but the 300 cases of AxiaLIF® 2L+TM System’s use (through the Limited Market Release) yielded a complication rate of 0.7 percent. The applicant also asserts that the pre-sacral approach results in a lower average length of stay than a non-sacral approach. The applicant referred us to several sources of literature presenting data related to the pre-sacral approach for the applicant’s AxiaLIF® device. Again, we expressed concern that the applicant generally repeated the statements made regarding the clinical improvement of its AxiaLIF® device and had not provided information that indicates that the AxiaLIF® 2L+TM System offers a substantial clinical benefit over the earlier AxiaLIF® or AxiaLIF® IITM devices. Moreover, the applicant failed to provide any clinical outcomes data for the AxiaLIF® 2L+TM System to substantiate its assertions regarding substantial clinical improvement for the AxiaLIF® 2L+TM System. While the applicant maintains that data from the AxiaLIF® device are relevant and can be used to substantiate its assertions for the AxiaLIF® 2L+TM System, we were concerned that data directly associated with the use of the AxiaLIF® 2L+TM System are not available. For example, we stated in the proposed rule that it was not clear the degree to which the population that required treatment with the AxiaLIF® 2L+TM System differed from the population that required treatment with the AxiaLIF® device or the AxiaLIF® IITM System, and that it was also not clear the degree to which the differences amongst the devices discussed above may affect clinical outcomes. We invited public comments on whether the AxiaLIF® 2L+TM System meets the substantial clinical improvement criterion for the new technology add-on payment for FY 2012. We did not receive any public comments regarding the substantial clinical improvement criterion. We did not receive any public comments with regard to this application. In the absence of comments with information addressing our various concerns with this application, we are not approving the AxiaLIF® 2L+TM System for new technology add-on payments for FY 2012. b. PerfectCLEAN With Micrillon® UMF Corporation (the manufacturer) submitted an application for a VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 technology called the PerfectCLEAN with Micrillon® (PerfectCLEAN). PerfectCLEAN is a cleaning textile product (or cleaning mat/wipe) with chlorine embedded or bound to the extruded fiber. The manufacturer asserts that PerfectCLEAN is intended to be used to trap and eliminate pathogens such as Methicillin-resistant Staphylococcus aureus (MRSA), Clostridium difficile (C diff.) and the H1N1 flu virus from surfaces within the hospital (as well as other health care facilities and locations). The applicant asserts that it can trap and remove more than 99.99 percent of bacteria on hard surfaces. The manufacturer stated that the PerfectCLEAN is an Environmental Protection Agency (EPA) approved antimicrobial/disinfectant that will be available on the market in the first quarter of 2011. The applicant maintains that PerfectCLEAN is subject to review and approval by the EPA per the EPA’s Federal Insecticide, Fungicide, Rodenticide Act (FIFRA) Treated Article Exemption and, therefore, is not subject to review by the FDA. The applicant states that it was determined in a pre-registry meeting with the EPA that the underlying chemistries used to create the chlorine binding effects of Micrillon® chemistry are EPA and FDA approved even though no FDA claims are being sought. With respect to whether the PerfectCLEAN is eligible for new technology add-on payments, in the proposed rule we noted that our regulations at § 412.87(c) state, ‘‘CMS will only consider, for add-on payments for a particular fiscal year, an application for which the new medical service or technology has received FDA approval or clearance by July 1 prior to the particular fiscal year.’’ FDA ‘‘approval,’’ refers to the premarket approval application (PMA) process for most Class III devices, and FDA ‘‘clearance’’ refers to the 510(k) premarket notification submission process for most Class II devices and some Class I and Class III devices (section 515 of the Food, Drug and Cosmetic Act (FDCA) for PMA) and sections 510(k) and 513(i) of the FDCA (for premarket notification submission process)). Therefore, we believe our regulations, by requiring applicants to receive an FDA approval or clearance in order to be eligible for new technology add-on payments, limit the universe of items and services eligible to receive these payments to those that require FDA approval or clearance. The applicant has informed CMS that it is in the process of registering and listing its product with the FDA under section PO 00000 Frm 00105 Fmt 4701 Sfmt 4700 51579 510(b) through (d) and (j) and anticipates this process to be completed prior to the July 1 regulatory deadline. The registration process that the applicant is currently pursing will result in neither FDA approval nor clearance. In the proposed rule, we stated that we were therefore concerned that the PerfectCLEAN is not eligible for new technology add-on payments under our existing regulations, which require ‘‘FDA approval or clearance by July 1 prior to the particular fiscal year’’ (42 CFR § 412.87(c)). We welcomed public comments on whether the PerfectCLEAN is eligible for new technology add-on payments under the current regulations. We did not receive any public comments in response to our concern that the PerfectCLEAN does not meet the newness criteria. Therefore, we conclude that the PerfectCLEAN does not meet the requirement specified under § 412.87(c) of our regulations that we requires applicants to receive an FDA approval or clearance by July 1 prior to the particular fiscal year, rather than registering and listing its product with the FDA, in order to be eligible for new technology add-on payments. As a result, we are not approving new technology add-on payments for the PerfectCLEAN for FY 2012. However, we will consider whether it would be appropriate for a product that is registered and listed with the FDA to be eligible for new technology add-on payments. If we conclude that such products should be eligible for new technology add-on payments in the future, we will propose changes to our regulations in a future rulemaking. With regard to the cost criterion, the applicant used data from the FY 2011 After Outliers Removed (AOR) file (posted on the CMS Web site) for its cost analysis, which is based on the FY 2009 MedPAR file. The applicant considered MS–DRGs that relate to surgeries, skin abrasions, open sores, wounds, and similar inflamed tissue conditions where infection sites are thought to be more likely to occur for inpatient care situations. This resulted in the applicant determining that the technology would be most frequently used in 622 different MS–DRGs. The applicant noted that the charges from the FY 2011 AOR file were not inflated from FY 2009 to FY 2011; therefore the applicant applied a 2-year inflation factor of 12 percent (to update the charges from FY 2009 to FY 2011). The applicant based the 2-year inflation factor of 12 percent on a 3-year average of the 2 year rate-of-change in charges (the 2-year rate-of-change for FY 2009 of 11.841 percent (73 FR 48764); the 2-year rate-of-change for FY 2010 of 14.184 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51580 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations percent (74 FR 44010); and the 2-year rate-of-change for FY 2011 of 9.8843 percent (75 FR 50429)) that CMS uses in its outlier threshold calculation as published in section II. of the Addendum to the annual IPPS final rule. The applicant computed a caseweighted standardized charge per case of $40,442 for all 622 MS–DRGs, which did not include any charges related to the PerfectCLEAN. Therefore, it added the charges related to the technology to the case-weighted average standardized charge per case in evaluating the cost threshold criterion. The manufacturer estimates a charge per patient of $100 per day for the PerfectCLEAN. The applicant includes in this amount charges for payroll, treated textiles, packaging and protective gloves, laundering, storage, and distribution. The applicant multiplied the average length of stay for each MS–DRG (as found in Table 5 of the Addendum to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50547 through 50566)) by the charge per patient per day to determine the total charges per stay by MS–DRG related to the PerfectCLEAN. The applicant added additional charges per stay for the PerfectCLEAN to the caseweighted standardized charge per case and determined a total case-weighted average standardized charge per case of $41,105. Based on the 622 MS–DRGs to which the technology mapped, the applicant computed a case-weighted threshold of $40,834. Because the total case-weighted average standardized charge per case of $41,105 exceeds the case weighted threshold of $40,834, the applicant maintains that it meets the cost criteria. In the proposed rule, we discussed several concerns regarding the applicant’s cost analysis. First, although the technology can potentially be used in every single Medicare case, the application targets specific MS–DRGs. The applicant did not provide a detailed clinical justification regarding their selection of MS–DRGs, or a detailed justification for why the technology could not be used in other MS–DRGs. We believe it would be more appropriate to target all cases in every MS–DRG when conducting the cost analysis for this type of non-procedure or condition specific item. Using the FY 2011 AOR file, we conducted our own analysis with the same methodology above (and inflated the charges and included the total charges per stay related to the PerfectCLEAN) across all MS–DRGs. Based on our analysis, we determined a total case-weighted average standardized charge per case of $29,535. Using the applicant’s VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 methodology, we also determined a case-weighted threshold of $37,384 across all MS–DRGs. Because the total case-weighted average standardized charge per case of $29,535 is less than the case-weighted threshold of $37,384, we believe the PerfectCLEAN may not meet the cost criteria. Second, the applicant included in the average charge per day more general charges unrelated to the specific new technology, such as payroll, packaging and protective gloves, laundering, storage and distribution. We do not believe it is appropriate to include charges for expenses already accounted for in MS–DRG based payments, such as laundering, storage, and distribution, and supplies already used by hospital staff such as packaging and protective gloves. We also note that the applicant states in its substantial clinical improvement discussion that the PerfectCLEAN represents the first comprehensive process for the removal and elimination of harmful microorganisms responsible for HAIs from patient environments, the elimination of cross-contamination, and significant savings across many cost centers. If the PerfectCLEAN is a substitute for other cleaning mechanisms such as wiping down a hospital room with a spray and can produce significant savings across many cost centers, then it would be appropriate to deduct some charges from the average charge per day in order to accurately reflect the cost to hospitals of this technology. For these reasons, we remain concerned about the accuracy of the computation of a charge per patient of $100 per day and whether the PerfectCLEAN meets the cost criterion. Thirdly, the applicant based the 12percent, 2-year rate-of-change in charges on a 3-year average (FY 2009 through FY 2011) of the 2-year rate-of-change in charges as published in section II. of the Addendum to the annual IPPS final rule. We do not believe it is appropriate to use a 3-year average of the 2-year rateof-change in charges as the 2-year rateof-change in charges already uses the most recent data available to measure this change and, therefore, does not need to be averaged with prior years. Specifically, as described in section II. of the Addendum to this final rule, to calculate the proposed FY 2012 2-year rate-of-change in charges, we compared the 1-year average annualized rate-ofchange in charges per case from the last quarter of FY 2009 in combination with the first quarter of FY 2010 (July 1, 2009 through December 31, 2009) to the last quarter of FY 2010 in combination with the first quarter of FY 2011 (July 1, 2010 through December 31, 2010). This rateof-change was 4.43 percent (1.044394) PO 00000 Frm 00106 Fmt 4701 Sfmt 4700 or 9.07 percent (1.090759) over 2 years. If we substitute the FY 2012 proposed 2-year rate-of-change in charges of 9.07 percent for the 12-percent 3-year average of the 2-year rate-of-change in charges that the applicant used in its cost analysis, the total case-weighted average standardized charge per case would be $40,047 across the 622 MS– DRGs to which the applicant believes the technology would map. As mentioned above, the applicant computed a case-weighted threshold of $40,834. Because the total caseweighted average standardized charge per case of $40,047 is less than the caseweighted threshold of $40,834, it appears the applicant would not meet the cost criteria. We invited public comment on whether the PerfectCLEAN meets the cost criterion. Comment: Several commenters expressed concerns that the cost estimates assume that this product would replace other items currently used in the hospital. Response: As mentioned above, because PerfectCLEAN does not meet the requirements specified under § 412.87(c) of our regualtions it was not approved for FY 2012 new technology add-on payments. Once an applicant does not meet one of our criteria (newness, cost and substantial clinical improvement; in that order), we typically do not respond to public comments on the rest of the new technology add-on payment criteria. However, we are responding to the public comment above to ensure our cost criteria policy is clear. The applicant substituted and added charges related to their product as part of its efforts to demonstrate that the product’s costs exceed the cost threshold. While we have concerns regarding certain aspects of the applicant’s methodology, it is common practice for new technology add-on payment applicants to substitute and/or add charges related to their technology in order to develop an average standardized charge per case to demonstrate that a technology exceeds the cost threshold. The applicant maintained that it met the substantial clinical improvement criteria for the following reasons: The applicant believes the PerfectCLEAN significantly improves clinical outcomes for a patient population as compared to currently available treatments, decreases rate of subsequent diagnostic or therapeutic interventions, and decreases the number of future hospitalizations or physician visits. The applicant cited independent laboratory studies that set forth the level of removal and elimination of pathogens achieved by E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations the PerfectCLEAN. The applicant stated that the PerfectCLEAN includes ‘‘more precise and focused patient room procedures that when properly applied utilize the textile and micro-denier efficacies’’ listed in the product’s independent test reports. The applicant stated that this results ‘‘in a safer patient environment where the likelihood of cross contamination is reasonable.’’ The applicant included test report data for the product, which demonstrated a 99.99 percent effectiveness of removing pathogens such as MRSA and C diff. The applicant cited industry and clinical support to demonstrate that improved patient environment can save lives. The applicant also stated that PerfectCLEAN represents the first comprehensive process for the removal and elimination of harmful microorganisms responsible for hospital acquired infections from patient environments, the elimination of crosscontamination, and significant savings across many cost centers. The applicant stated that this new innovative system delivers reliable and repeatable results not currently achieved using currently available protocols and products. The applicant provided the following example: a traditional method of disinfection is to apply liquid disinfectants, which the applicant stated typically requires a 10-minute dwell time (which in most cases is not completed by the hospital) and then wiping or mopping up the nonevaporated liquids. Compared to this method, the applicant asserts that the PerfectCLEAN first removes the micro-organisms from those surfaces using specially designed microscopic fibers. The applicant asserted that these pathogens are trapped in a formulation of a chlorine binding technology which eliminates the pathogens. The applicant further asserted that the PerfectCLEAN maintains its disinfecting capability longer than other methods because the chlorine-binding technology is introduced at the pellet stage of fiber extrusion so that it is present throughout the fiber, as opposed to a finish or coating process that wears off as textiles are used and laundered. Additionally, the applicant asserted that the technology’s non-leaching chlorination system recharges in the wash process by attracting and binding free molecules of chlorine. The applicant further asserted that in this way the PerfectCLEAN recharges back to its original strength and efficacy which allows it to work more rapidly than other techniques. The applicant asserted that this reduces cross-contamination by those persons handling soiled textiles VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 after the people contact surfaces which have been cleaned of harmful microorganisms. The applicant added that the training in use of color coated textiles (different color mats) affords superior monitoring and compliance supervision of the hygiene specialists charged with responsibility to reduce cross contamination. We invited public comment on whether the PerfectCLEAN meets the substantial clinical improvement criterion. Comment: Several commenters opposed consideration of this product for new technology add-on payments. The commenters stated that neither CMS nor the applicant provided sufficient supporting data to approve this technology for add-on payments. The commenters also stated that a cursory review of information sources on this product, including the company’s own Web site, did not identify any scientific, peer-reviewed studies demonstrating efficacy against cross transmission, or prevention or mitigation of Healthcare-Acquired Infections (HAIs). The commenters urged CMS not to approve the application for new technology add-on payments for this or any product that lacks scientific evidence of its efficacy and urged CMS to use objective rigor to evaluate the methodological quality and strength of evidence submitted in support of new technology add-on payment applications. Response: Because PerfectCLEAN does not meet the requirements specified under § 412.87(c) of our regulations (and was not approved for FY 2012 new technology add-on payments), we are not responding to these public comments in this final rule. 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 delineations of statistical areas established by the Office of Management and Budget (OMB). A discussion of the FY 2012 hospital wage index based on the statistical areas, including OMB’s revised definitions of Metropolitan PO 00000 Frm 00107 Fmt 4701 Sfmt 4700 51581 Areas, appears under section III.B. 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 2012 is discussed in section II.B. of the Addendum to this final rule. As discussed below in section III.H. of this preamble, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. The budget neutrality adjustment for FY 2012 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, 2011 (the FY 2012 wage index) appears under section III.C. of this preamble. B. 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 delineations of CBSAs and our implementation of the CBSA definitions, we refer readers to the E:\FR\FM\18AUR2.SGM 18AUR2 51582 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations preamble of the FY 2005 IPPS final rule (69 FR 49026 through 49032). As with the FY 2011 final rule, and as we proposed, in this FY 2012 final rule, we are providing that hospitals receive 100 percent of their wage index based upon the CBSA configurations. Specifically, for each hospital, we determined a wage index for FY 2012 employing wage index data from hospital cost reports for cost reporting periods beginning during FY 2008 and using the CBSA labor market definitions. We consider CBSAs that are Metropolitan Statistical Areas (MSAs) to be urban, and CBSAs that are Micropolitan Statistical Areas as well as areas outside of CBSAs to be rural. In addition, it has been our longstanding policy that where 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)). In OMB Bulletin No. 10–2, issued on December 1, 2009, OMB announced that the CBSA changes in that bulletin would be the final update prior to the 2010 Census of Population and Housing. CMS adopted those changes in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50162), beginning October 1, 2010, and they are reflected in this FY 2012 final rule. In 2013, OMB plans to announce new area delineations based on its 2010 standards (75 FR 37246) and the 2010 Census data. The OMB bulletin is available on the OMB Web site at https:// www.whitehouse.gov/OMB—go to ‘‘Agency Information’’ and click on ‘‘Bulletins’’. mstockstill on DSK4VPTVN1PROD with RULES2 C. Occupational Mix Adjustment to the FY 2012 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 than geographic differences in the costs of labor. 1. Development of Data for the FY 2012 Occupational Mix Adjustment Based on the 2007–2008 Occupational Mix Survey As provided for under section 1886(d)(3)(E) of the Act, we collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. For the FY 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. As we proposed, for the FY 2012 hospital wage index, we again used occupational mix data collected on the 2007–2008 Medicare Wage Index Occupational Mix Survey to compute the occupational mix adjustment for FY 2012. We included data for 3,168 hospitals that also have wage data included in the FY 2012 wage index. 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 and are using the 2007–2008 occupational mix survey data in this final rule for the FY 2012 wage index. Therefore, a new measurement of occupational mix will be required for FY 2013. The new 2010 survey (Form CMS– 10079 (2010)) provides 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. The 2010 survey was adopted in the Federal Register on January 15, 2010 (75 FR 2548) and approved by OMB on February 26, 2010 (OMB control number 0938–0907). The survey is available on the CMS Web site PO 00000 Frm 00108 Fmt 4701 Sfmt 4700 at: https://www.cms.hhs.gov/ AcuteInpatientPPS/WIFN/ list.asp#TopOfPage and through the fiscal intermediaries/MACs. Hospitals were 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. 3. Calculation of the Occupational Mix Adjustment for FY 2012 For FY 2012 (as we did for FY 2011), 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: (1) Registered nurses; (2) licensed practical nurses; (3) nursing aides, orderlies, and attendants; and (4) medical assistants. Step 2—Determine a national average hourly rate for each nursing subcategory by dividing a subcategory’s total salaries for all hospitals in the occupational mix survey database by the subcategory’s total hours for all hospitals in the occupational mix survey database. Step 3—For each hospital, determine an adjusted average hourly rate for each nursing subcategory by multiplying the percentage of the total nursing category (from Step 1) by the national average hourly rate for that nursing subcategory (from Step 2). Repeat this calculation for each of the four nursing subcategories. Step 4—For each hospital, determine the adjusted average hourly rate for the total nursing category by summing the adjusted average hourly rate (from Step 3) for each of the nursing subcategories. Step 5—Determine the national average hourly rate for the total nursing category by dividing total nursing category salaries for all hospitals in the occupational mix survey database by total nursing category hours for all hospitals in the occupational mix survey database. Step 6—For each hospital, compute the occupational mix adjustment factor for the total nursing category by dividing the national average hourly rate for the total nursing category (from 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 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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.F. 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 adjusted by the occupational mix. A hospital’s all other portion is determined by subtracting the hospital’s nursing category percentage from 100 percent. Step 8—For each hospital, calculate the total occupational mix adjusted salaries and wage-related costs for a hospital by summing the occupational mix adjusted salaries and wage-related costs for the total nursing category (from Step 7) and the portion of the hospital’s salaries and wage-related costs for all other employees (from Step 7). To compute a hospital’s occupational mix adjusted average hourly wage, divide the hospital’s total occupational mix adjusted salaries and wage-related costs by the hospital’s total hours (from Step 4 of the unadjusted wage index calculation in section III.F. 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 PO 00000 Frm 00109 Fmt 4701 Sfmt 4700 51583 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 2012 occupational mix adjusted national average hourly wage is $36.2481. Step 11—To compute the occupational mix adjusted wage index, divide each area’s occupational mix adjusted average hourly wage (Step 9) by the national occupational mix adjusted average hourly wage (Step 10). Step 12—To compute the Puerto Rico specific occupational mix adjusted wage index, follow Steps 1 through 11 above. The FY 2012 occupational mix adjusted Puerto Rico-specific average hourly wage is $15.4142. The table below is an illustrative example of the occupational mix adjustment. BILLING CODE 4120–01–P E:\FR\FM\18AUR2.SGM 18AUR2 VerDate Mar<15>2010 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00110 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.014</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51584 51585 BILLING CODE 4120–01–C VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00111 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.015</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 51586 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Because the occupational mix adjustment is required by statute, all hospitals that are subject to payments under the IPPS, or any hospital that would be subject to the IPPS if not granted a waiver, must complete the occupational mix survey, unless the hospital has no associated cost report wage data that are included in the FY 2012 wage index. For the FY 2007–2008 survey, the response rate was 90.8 percent. In computing the FY 2012 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 its 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 2012 occupational mix adjusted wage index. In addition, if a hospital submitted a survey, but that survey data could not be used because we determined the survey data 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 hospitals that did not submit occupational mix survey data, the occupational mix adjustment factor ranged from a low of 0.9246 (CBSA 17780, College Station-Bryan, TX), to a high of 1.0761 (CBSA 19, Rural Louisiana). 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 percentage of the area’s total workers attributable to the area’s total nursing category. For FY 2012, there are five CBSAs (that include six hospitals) for which we did not have occupational mix data for any of its hospitals. The CBSAs are: • CBSA 36140, Ocean City, NJ (1 hospital) • CBSA 22140, Farmington, NM (1 hospital) • CBSA 41900, San German-Cabo Rojo, PR (2 hospitals) • CBSA 49500, Yauco, PR (1 hospital) • CBSA 21940, Fajardo, PR (1 hospital) Since the FY 2007 IPPS final rule, we have periodically discussed applying a hospital-specific penalty to hospitals that fail to submit occupational mix survey data (71 FR 48013 through 48014; 72 FR 47314 through 47315; 73 FR 48580; 74 FR 43832, and 75 FR 50167). 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 developed the FY 2011 wage index. In the FY 2011 IPPS/LTCH PPS proposed and final rules (75 FR 23943 and 50167, respectively), 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.C.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. PO 00000 Frm 00112 Fmt 4701 Sfmt 4700 D. Worksheet S–3 Wage Data for the FY 2012 Wage Index The FY 2012 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2008 (the FY 2011 wage index was based on data from cost reporting periods beginning during FY 2007). 1. Included Categories of Costs The FY 2012 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. 2. Changes to the Reporting Requirements for Pension Costs for the Medicare Wage Index a. Background The instructions for determining and reporting costs of qualified defined benefit pension on the cost report for Medicare cost-finding purposes are located in section 2142 of the Provider Reimbursement Manual, Part I (PRM–I). For Medicare wage index purposes, the instructions in section 3605.2 of the Provider Reimbursement Manual, Part II (PRM–II) for Worksheet S–3, Part II, Lines 13 through 20, require hospitals to comply with the requirements in section 2142 of the PRM–I. Specifically, section 2142.5 of the PRM–I defines the current period liability for pension cost (that is, the maximum allowable pension cost) based on the actuarial accrued liability, normal cost, and unfunded actuarial liability. Under section 2142.4(A) of the PRM–I, these liability measurements are to be computed in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), regardless of whether or not the pension plan is subject to ERISA. Also, section 2142.6(A) of the PRM–I requires the current period liability for pension costs to be funded in order to be allowable. In addition, section 2142.6(C) of the PRM–I allows for funding in excess of E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations the current period liability to be carried forward and recognized in future periods. We note that, on March 28, 2008, CMS published Revision 436, a technical clarification to section 2142 of the PRM–I. Under ERISA, the actuarial accrued liability and normal cost are typically determined on an ongoing plan basis using long-term, best-estimate assumptions. The interest assumption reflects the average rates of return expected over the period during which benefits were payable, taking into account the investment mix of plan assets. Pension costs for plans not subject to ERISA (such as church plans and plans sponsored by public sector employers) are also typically based on the actuarial accrued liability and normal cost using long-term, best estimate assumptions. The Pension Protection Act (PPA) of 2006 (Pub. L. 109–280) amended ERISA. Under the PPA amendments to ERISA, the actuarial accrued liability and normal cost are no longer used as a basis for determining ERISA minimum required or maximum tax deductible contributions. ERISA contribution limits are now based on a ‘‘funding target’’ and ‘‘target normal cost’’ measured on a settlement basis using the current market interest rates for investment grade corporate bonds that match the duration of the benefit payouts. The Internal Revenue Service (IRS) publishes the applicable interest rate tables on a monthly basis. Because pension liabilities are very sensitive to changes in the interest rate used to discount future benefit payouts, pension costs based on the PPA ‘‘funding target’’ and ‘‘target normal cost’’ values are expected to be less stable than those based on the pre-PPA traditional longterm, best-estimate assumptions, which change infrequently. Furthermore, plans not subject to the ERISA requirements, as amended by the PPA, are not likely to use the new ‘‘funding target’’ and ‘‘target normal cost’’ basis for determining pension costs, and ERISA plans are not likely to continue to report costs developed using the actuarial accrued liability and normal cost based on long-term, best estimate assumptions. Accordingly, there is no longer a standard actuarial basis used by all plans. In response to the PPA amendments to ERISA, we began a review of the rules for determining pension costs for Medicare cost finding and wage index purposes. As an interim measure, we issued a Joint Signature Memorandum (JSM) in November 2009 that contained instructions and a spreadsheet to assist hospitals and Medicare contractors in VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 determining the annual allowable defined benefit pension cost for the FY 2011 wage index (JSM/TDL–10061, 11– 20–09, December 3, 2009). Although these instructions were released for purposes of the wage index, they also serve as interim guidance for Medicare cost-finding purposes. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25874 through 25876), we proposed to revise our policy for determining pension cost for Medicare purposes. As mentioned above, due to the ERISA rules, as amended by the PPA, there is no longer a standard actuarial cost basis used by all types of plans. Therefore, we proposed to no longer rely on actuarial computations to determine the maximum annual cost limitation for Medicare. Instead, the general parameters of our policy would maintain the current requirement that pension costs must be funded to be reportable, and would require all hospitals to report the actual pension contributions funded during the reporting period, on a cash basis. In addition, under this cash basis approach, we proposed separate methodologies for measuring pension costs for Medicare cost-finding purposes (discussed in section IV.M. of this preamble) and for purposes of updating the wage index (discussed below in section III.D.2.b. of this preamble). It is necessary to have two distinct policies in order to address the different goals of determining a hospital’s payments and updating the average hourly wage to establish the geographic area wage index. The function of the wage index is to measure relative hospital labor costs across areas. This function is distinct from Medicare payment determinations, where the goal is to measure the actual costs incurred by individual hospitals. These two distinct policies would require separate updated instructions to section 2142 of the PRM– I for Medicare cost-finding purposes and section 3605.2 of the PRM–II for purposes of the wage index. Below is a detailed discussion of our proposal for reporting pension costs under the wage index, as well as our final policy. A full discussion of our new methodology for Medicare cost-finding purposes is discussed in section IV.M. of this preamble, along with a summary of the public comments we received, our responses, and statements of our final policy. The final policy below reflects our commitment to the general principles of the President’s Executive Order released January 18, 2011, entitled ‘‘Improving Regulation and Regulatory Review.’’ PO 00000 Frm 00113 Fmt 4701 Sfmt 4700 51587 b. Proposed and Final Policy for Allowable Pension Cost for the Medicare Wage Index As mentioned above, the function of the Medicare wage index is to measure relative hospital labor costs across all areas. Therefore, while we believe pension costs must be funded in order to be reportable (we refer readers to the August 12, 2010 Federal Register (74 FR 47369) for an explanation of this longstanding policy), it also is important for pension costs to be relatively stable from year to year so that there is less volatility in the wage index. Thus, in the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to include, in the wage index, pension costs equal to a hospital’s average actual cash contributions deposited to its defined benefit pension plan over a 3-year period. The use of cash contributions as a measure of the costs incurred is necessary to ensure uniformity among all hospitals, regardless of their tax status or ERISA coverage. The 3-year average is intended to reduce the volatility that often occurs due to timing of contributions. Most pension plan sponsors have flexibility to determine the pension funding for a particular period and their decisions may be based on cash-flow considerations or other factors unrelated to the normal operation of the plan. Furthermore, the funding of current period pension costs may be delayed by almost a full year after the close of the period to which it applies. By using a 3-year average, we hope to enhance the stability of the wage index. To ensure that the average annual pension cost reflected in the wage index is consistent with the reporting period applicable to all other costs included in the index, we proposed that the 3-year average be centered on the current cost reporting period for the wage index. For example, the 2013 wage index is based on cost reporting periods beginning during Federal Fiscal Year (FFY) 2009 and would therefore reflect the average pension contributions made in hospitals’ cost reporting periods beginning during FFYs 2008, 2009, and 2010. Thus, this policy would require pension plan contribution data for the cost reporting periods immediately preceding and immediately following the current cost reporting period for the wage index. In the proposed rule, we indicated that we do not anticipate that the use of contributions made in the period immediately following the current cost reporting period will create an administrative burden because, even under the existing rule, contributions to E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51588 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations fund current period costs are often deferred until the following period. In addition, trust account statements and general ledger reports to support the contributions should be readily available. We proposed to apply the above methodology for reporting pension costs for the wage index beginning with the FY 2013 IPPS update. We solicited public comment on this policy proposal and indicated that we were especially interested in receiving comments related to the proposed 3-year averaging period. Comment: A number of commenters suggested that CMS convene a Medicare Technical Advisory Group (MTAG) before establishing a policy on pension costs. Response: An MTAG is not required by statute. Engaging in notice and comment rulemaking provides sufficient process for developing a policy on this issue. In addition, timeliness of an updated rule is needed because the actuarial terminology used in section 2142 of the PRM–I is no longer used under ERISA as amended by the PPA. Also, as many commenters noted, there have been numerous appeals related to pension cost adjustments in recent years, and we believe our policy will alleviate the confusion demonstrated by such appeals. Proposing the issue through the notice and comment rulemaking process will allow CMS to address the issue by finalizing the policy effective October 1, 2011. Comment: Many commenters supporting an MTAG also stated that an MTAG might recommend adoption of Generally Accepted Accounting Principles (GAAP) (with no funding limit) for the wage index. These commenters generally called for CMS to propose a methodology that accurately reflects the total resources hospitals expend over the life of their defined benefit plans and recognizes those costs fully in the wage index. They implied that GAAP could be the most appropriate method to satisfy this goal. One commenter noted that a proposal to base pension expense for both the wage index and cost-finding purposes on a 3year average of actual funding is inconsistent with the other principles of the cost report relying on GAAP and accrual versus cash-basis accounting. Response: There is no consistently applied, standardized pension cost accounting methodology that produces a stable measure of the actual cost incurred over the life of a pension plan. Moreover, not all providers are subject to the same GAAP standards, and the rules applicable to pension costs under the various standards are not consistent. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Uniformity of costs for the wage index would require all providers to compute pension costs under a particular GAAP standard. This would create an administrative burden for some and would limit transparency. Even under GAAP as promulgated by the Financial Accounting Standards Board (FASB), significant inconsistencies may exist because the rules allow gains and losses to either be recognized immediately (as a current period cost), or spread over future periods. Until recently, immediate recognition of gains and losses was seldom used because it can cause pension costs to be extremely volatile. For example, those who have adopted immediate recognition of gains and losses are likely to see their GAAP pension costs shift to pension income (negative costs) when interest rates begin to rise. Finally, the GAAP standards are currently in a state of flux. The Government Accounting Standards Board (GASB) and the International Accounting Standards Board (IASB) are both in the process of reviewing their rules for pension accounting. The FASB and IASB are discussing how U.S. accounting can be reconciled with international accounting. We anticipate changes in GAAP pension rules will reflect the trend towards mark-to-market financial reporting (immediate recognition of gains and losses) and thereby further increase the potential volatility of those cost measurements. Comment: Most commenters expressed concern that hospitals with prefunded pension plans would be disadvantaged, while those with underfunded plans would be rewarded. A number of these commenters called for a ‘‘true-up’’ of costs to ensure absolute equity between past and future periods, similar to the carry forward provision in the current PRM. Response: We continue to believe that absolute equity between past and future periods is not necessary since the wage index is a relative rather than an absolute measure of costs. However, in response to public comments, we agree that it would be appropriate to allow certain prefunded amounts to be reported as pension costs in future periods. Although most plan sponsors follow a relatively stable pattern of funding over time, accelerated funding may have been required due to stock market losses and declining interest rates in recent years. We are particularly sensitive to the fact that many hospitals were required to make contributions in excess of the amount reportable for Medicare purposes to satisfy ERISA requirements based on the ‘‘current PO 00000 Frm 00114 Fmt 4701 Sfmt 4700 liability.’’ We are also aware that some hospitals accelerated their pension plan funding in order to avoid benefit restrictions or other penalties under the PPA amendments to ERISA. As a result, we are finalizing a transition policy based on funding that may have exceeded the amounts reportable for the FY 2007 through FY 2012 wage indexes (cost reports with begin dates during the period of (on or after) October 1, 2002 through (on or before) September 30, 2008). We believe this period is representative of the period when contributions may have exceeded the amounts reportable for Medicare purposes. Our transition policy will allow providers to establish a prefunding balance equal to (A) minus (B), where (A) is the sum of cash contributions made during a period of consecutive provider cost reporting periods commencing no earlier than October 1, 2002 (the cost reporting period applicable for the FY 2007 wage index), and ending with the cost reporting period applicable for the FY 2012 wage index, and (B) is the sum of pension costs actually reflected in the wage index for the same cost reporting periods. It should be noted that the prefunding balance is not the same as the carry forward amount described in section 2142.6C of the PRM–I since the carry forward amount may include different periods and may include contributions made after the end of the cost reporting period ending immediately prior to the effective date of this new policy. The transition policy permits a hospital to include 1/10th of the prefunding balance in the wage index pension cost each year commencing with the FY 2013 wage index and ending with the FY 2022 wage index, that is, in 10 equal prefunding installments. Any prefunding installment that is not included in the wage index pension cost for the current cost reporting period cannot be reassigned and added to the wage index pension cost of any subsequent period. To take advantage of all 10 prefunding installments, hospitals must determine and begin claiming the prefunding installment in the pension cost for the FY 2013 wage index. Distributing excess funding over a period of 10 years will ensure that when hospitals have substantial prefunding balances, the amount assigned to any one year will not unduly influence the wage index in that year. An example of how the pension cost (including the prefunding balance) is to be calculated is included in our response to another comment. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 For each cost reporting period that a prefunding installment is included in the reported pension cost, the provider must have documentation to support the calculation of the prefunding balance, including the contributions made to the pension plan and pension costs reported in the wage index for each applicable cost reporting period reflected in the calculation. In order to notify the public of this transition policy, we will issue a memorandum to Medicare contractors after the publication of this final policy, requiring them to notify hospitals in writing of these changes. In addition, we plan to post this letter on our Web site and will announce these changes through our regular open door forums. Comment: A number of commenters expressed support for our proposed rule. One viewed it as a compromise between methods required for private, public, and non-profit entities and thought its simplicity will help to maintain consistency. Another felt it would fairly reflect the actual costs, mitigate year-to-year volatility, and encourage adequate funding. One commenter agreed with our decision to eliminate actuarial based measurements because they were too complex and lead to inconsistency. A number of commenters noted that the Medicare wage index methodology ‘‘should be transparent so that it can be easily reviewed and replicated by providers and other constituents, which allows providers and others to have confidence in the resulting indices.’’ Response: We appreciate the commenters’ support of our proposal. Our final policy is intended to be one of simplicity that will help maintain consistency. We believe that this final policy will satisfy the objectives of a transparent methodology for including pension costs in the wage index. Comment: One commenter expressed concern that our proposal would hurt financially strapped hospitals that cannot afford to fund their plans. Another commenter believed that the proposal in the proposed rule would understate wage related costs in periods when a provider was not able to fund, and overstate wage costs in other periods. One commenter was concerned that the proposal in the proposed rule would ‘‘incent a hospital to ‘over fund’ their plan in a particular year to increase its hourly rate.’’ One commenter stated that our policy will penalize good management of investments while rewarding bad management. Response: Our policy is that costs must be funded to be reportable for Medicare purposes. Some providers have no legal obligation to fund their pension liabilities. There may be organizations that cannot afford to maintain their plan and will ultimately terminate the plan with unfunded liabilities. Moreover, some liabilities reflected in current period costs may never materialize due to future gains or benefit cutbacks. We understand that the level of funding will vary from one period to the next due to financial constraints or other factors, but believe that the 3-year average will help to limit volatility caused by short-term fluctuations. We do not believe that Medicare wage index policy will have a material effect on the ultimate level of pension plan funding. Because pension contributions made to a qualified trust are generally irrevocable and most providers have limited financial resources, significant overfunding is not likely to occur solely because of Medicare wage index policy. Over the long term, pension costs may increase or decrease due to changes in plan coverage, benefit levels, or gains and losses from investment performance or other sources. However, these changes would ultimately affect the level of future pension costs regardless of how those costs have been reported in the past. Thus, we do not expect that providers will choose investments with poor returns or elevate their contribution levels for the sole purpose of increasing their wage index. Comment: Several commenters requested clarification on technical aspects of the proposed rule on timing or procedural issues. There was confusion regarding the treatment of payments made after the end of a fiscal year but within the 1-year period (or 3 years with extension) permitted under the liquidation of liabilities provision in section 2305 of PRM–I. Response: The pension cost to be reflected in the wage index will be reported on Worksheet S–3, Part II and will equal the average contributions paid, on a cash basis, over the applicable 3-year period (plus any prefunding installment discussed above). The applicable period for the 3year average includes the current cost reporting period applicable to the wage index (4 year lag), and the periods immediately preceding and immediately following the applicable wage index reporting period. The 3-year average is reportable even if it exceeds the current period contribution. There is no requirement to demonstrate that the 3year average, prefunding installment or the amount funded in any particular period are necessary to satisfy a liability under ERISA or any other actuarial basis. Since actuarial measurements are not used to compute pension costs under the final policy, there is no longer a need for a crosswalk between the different terminology used by IRS and GAAP. For a new plan, the averaging period will be limited to the number of years the plan was in effect. If there is a merger (plan or corporate), contributions should include a provider’s pension plan payments made either to a predecessor plan or the current plan during the applicable 3year period. Increased costs attributable to benefit improvements will be recognized when funded. This is consistent with the amortization of costs associated with plan changes under GAAP and ERISA. The actual funded amounts for each cost reporting period to be included in the average will not necessarily appear on the cost report for the period in which they were made. We are considering modifications to the cost report to allow for reporting of current period contributions. Instead, provider will be required to obtain contribution data from the pension trustee, insurance carrier, Schedule B or SB of IRS Form 5500, and, if applicable, from accounting records showing the allocation of total plan contributions to each participating provider. These records should be maintained as needed for subsequent periods. The following is an example of the calculation of pension cost to be included in the FY 2013 wage index calculation for a hospital with a June 30 fiscal year end and a June 30 cost reporting period: Provider fiscal year Wage index year Beginning 2007 2008 2009 2010 ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00115 7/1/2003 7/1/2004 7/1/2005 7/1/2006 Fmt 4701 Sfmt 4700 51589 Ending 6/30/2004 6/30/2005 6/30/2006 6/30/2007 E:\FR\FM\18AUR2.SGM Total pension contributions Reported wage index pension cost $3,200,000 not available 1,300,000 2,700,000 $2,500,000 2,800,000 800,000 3,000,000 18AUR2 51590 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Provider fiscal year Total pension contributions Wage index year Beginning mstockstill on DSK4VPTVN1PROD with RULES2 2011 ......................................................................................... 2012 ......................................................................................... 2013 ......................................................................................... Since this hospital can only produce supporting documentation of contributions for the continuous fiscal years beginning 2005 through 2008, the determination of the prefunding balance must exclude contributions from fiscal years beginning (FYB) in 2003 and 2004. The sum of contributions made during FYB in 2005 through 2008 is $11,100,000. The sum of pension costs reflected in the wage index for FYB in 2005 through 2008 is $7,600,000. The prefunding balance is $3,500,000 ($11,100,000—$7,600,000) and the prefunding installment is $350,000 ($3,500,000/10). The $350,000 prefunding installment can be added to the pension costs reported each year for the FY 2013 through FY 2022 wage index. In this illustration, the hospital determines the 3-year average pension contribution for the FY 2013 wage index is $2,000,000 based on cash contributions made during FYB in 2008, 2009, and 2010. It should report pension costs of $2,350,000 (the sum of the current 3-year average contribution of $2,000,000 [($1,000,000 + $3,000,000 + $2,000,000) 3] plus the prefunding installment of $350,000) on Worksheet S–3, Part II for the FY 2013 wage index. For audit purposes, the hospital must retain and make available its supporting documentation for the 3-year average, the prefunding balance and prefunding installment. We note that contributions are to be determined on a cash basis rather than an accrual basis. Since there is no recognition of funding which occurs after June 30, 2011, all of the data needed to determine the pension cost for the FY 2013 wage index will be readily available when the reporting process begins in October 2011. Under this final policy, neither section 2142 nor 2305 will be applicable for wage index purposes. Comment: One commenter believed that we may be ‘‘attempting retroactive rulemaking.’’ Another commenter stated that ‘‘if it goes forward with the proposal or a revised version of the proposal, CMS should do so in a prospective manner * * * CMS should apply it only as of the FY 2016 wage index (which would, if using a 3-year rolling average, include pension costs VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 7/1/2007 7/1/2008 7/1/2009 7/1/2010 Ending Frm 00116 Fmt 4701 Sfmt 4700 4,100,000 3,000,000 1,000,000 2,000,000 3,600,000 200,000 .............................. .............................. 6/30/2008 6/30/2009 6/30/2010 6/30/2011 from cost reporting periods beginning during Federal fiscal years 2011, 2012 and 2013).’’ Response: We disagree with the commenter that our policy represents retroactive rulemaking. We proposed this change through notice and comment rulemaking and have given the public sufficient time to provide input through public comments before making any policy change concerning the reporting of pension costs under the wage index. The use of data from prior periods to implement prospective policy changes does not constitute retroactive rulemaking. Therefore, we believe we have applied this policy change prospectively. Comment: One commenter recommended that there should be specific statements in the cost report that pension costs for cost-finding will be treated differently from pension costs for the wage index. The commenter also suggested separate PRM cost reporting instructions for the Medicare cost report versus the Medicare wage index, given that there will be separate methodologies for determining pension costs. Response: CMS is implementing different pension cost policies for wage index and cost finding purposes. Accordingly, the PRM will be revised to include separate and distinct pension cost provisions for wage index and costfinding purposes. We would like to thank the provider community for their public comments on the proposed rule for reporting pension costs for Medicare wage index purposes. After considering their concerns and suggestions, we are finalizing our policy with modifications for reporting pension costs for Medicare wage index purposes. The final policy is effective for the FY 2013 wage index for which the wage index process begins in October 2011. Under the final policy, the pension cost to be included in the wage index equals a hospital’s average cash contributions deposited to its defined benefit pension plan over a 3-year period, or number of years that the hospital has sponsored a defined benefit plan if less than 3 years. Any reversion or other withdrawal of assets from the pension fund or trust is treated as a PO 00000 Reported wage index pension cost negative contribution for purposes of measuring the 3-year average. The 3year average is centered on the base cost reporting period for the wage index. For example, the FY 2013 wage index will be based on Medicare cost reporting periods beginning during FFY 2009 and will reflect the average pension contributions made in hospitals’ cost reporting periods beginning during FFYs 2008, 2009, and 2010. In response to the public comments as discussed above, we are finalizing a transition policy that permits a hospital to determine a ‘‘prefunding balance’’ based on pension contributions made but not reflected in the wage index during certain prior periods. Our transition policy will allow providers to establish a prefunding balance equal to (A) minus (B), where (A) is the sum of cash contributions made during a period of consecutive provider cost reporting periods commencing no earlier than October 1, 2002 (the cost reporting period applicable for the FY 2007 wage index), and ending with the cost reporting period applicable for the FY 2012 wage index, and (B) is the sum of pension costs actually reflected in the wage index for the same cost reporting periods. The transition policy permits a hospital to include 1/10th of the prefunding balance in the wage index pension cost each year commencing with the FY 2013 wage index and ending with the FY 2022 wage index, that is, in 10 equal prefunding installments. Any prefunding installment that is not included in the wage index pension cost for the current year cannot be reassigned and added to the wage index pension cost of any subsequent year. 3. Excluded Categories of Costs Consistent with the wage index methodology for FY 2011, the wage index for FY 2012 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 FY 2012 wage index also excludes the E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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). mstockstill on DSK4VPTVN1PROD with RULES2 4. 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. E. Verification of Worksheet S–3 Wage Data The wage data for the FY 2012 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, 2007, and before October 1, 2008. For wage index purposes, we refer to cost reports during this period as the ‘‘FY 2008 cost report,’’ the ‘‘FY 2008 wage data,’’ or the ‘‘FY 2008 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 2008 data submitted to us as of June 27, 2011. 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 result in specific edit failures. For the proposed FY 2012 wage index, we identified and excluded 23 providers with data that was too aberrant to include in the proposed wage index, although we stated that if data elements for some of these providers are corrected, we intended to include some of these providers in the FY 2012 final wage index. We have received corrected data for seven providers, and therefore, we are including the data for these seven providers in the FY 2012 final wage index. However, we have also determined that the data for three VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 additional providers are too aberrant to include in the FY 2012 final wage index. Thus, in total, we are excluding the data of 27 (23 + 7—3) providers from the FY 2012 final wage index. In constructing the FY 2012 wage index, we included the wage data for facilities that were IPPS hospitals in FY 2008, 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). In the proposed rule, we removed 19 hospitals that converted to CAH status between February 16, 2010, the cut-off date for CAH exclusion from the FY 2011 wage index, and February 15, 2011, the cut-off date for CAH exclusion from the FY 2012 wage index. However, since the issuance of the proposed rule, we have learned of four additional hospitals that have converted to CAH status between February 16, 2010, and February 15, 2011. We have excluded the wage data of these four hospitals as well. After removing hospitals with aberrant data and hospitals that converted to CAH status, the FY 2012 final wage index is calculated based on 3,489 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 included separate wage data for campuses of three multicampus hospitals. For FY 2012, as we discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50168), and as we proposed, we are no longer allowing hospitals to use 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 PO 00000 Frm 00117 Fmt 4701 Sfmt 4700 51591 FTE data by campus for multicampus hospitals (Form CMS–2552–96, Worksheet S–2, lines 61 and 62). The data from cost reporting periods that begin in FY 2008 are now available for calculating the wage index for FY 2012. Therefore, a multicampus hospital will not have the option 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. Table 2 for the FY 2012 wage index, which is listed in section VI. of the Addendum to this proposed rule and available via the Internet, includes separate wage data for campuses of three multicampus hospitals. F. Method for Computing the FY 2012 Unadjusted Wage Index 1. Steps for Computation The method used to compute the FY 2012 wage index without an occupational mix adjustment follows: Step 1—As noted above, we based the proposed FY 2012 wage index on wage data reported on the FY 2008 Medicare cost reports. We gathered data from each of the non-Federal, short-term, acute care hospitals for which data were reported on the Worksheet S–3, Parts II and III of the Medicare cost report for the hospital’s cost reporting period beginning on or after October 1, 2007, and before October 1, 2008. In addition, we included data from some hospitals that had cost reporting periods beginning before October 2007 and reported a cost reporting period covering all of FY 2008. 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 2008 data. We note that, if a hospital had more than one cost reporting period beginning during FY 2008 (for example, a hospital had two short cost reporting periods beginning on or after October 1, 2007, and before October 1, 2008), 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), E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51592 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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, 2005, through April 15, 2007, 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 PO 00000 Frm 00118 Fmt 4701 Sfmt 4700 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 2012. The factors used to adjust the hospital’s data were based on the midpoint of the cost reporting period, as indicated below. MIDPOINT OF COST REPORTING PERIOD After 10/14/2007 11/14/2007 12/14/2007 01/14/2008 02/14/2008 03/14/2008 04/14/2008 05/14/2008 06/14/2008 07/14/2008 08/14/2008 09/14/2008 10/14/2008 11/14/2008 12/14/2008 01/14/2009 02/14/2009 03/14/2009 Adjustment factor Before .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... 11/15/2007 12/15/2007 01/15/2008 02/15/2008 03/15/2008 04/15/2008 05/15/2008 06/15/2008 07/15/2008 08/15/2008 09/15/2008 10/15/2008 11/15/2008 12/15/2008 01/15/2009 02/15/2009 03/15/2009 04/15/2009 .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... 1.03990 1.03699 1.03402 1.03113 1.02831 1.02555 1.02286 1.02024 1.01766 1.01511 1.01258 1.01015 1.00787 1.00575 1.00375 1.00183 1.00000 0.99820 For example, the midpoint of a cost reporting period beginning January 1, 2008, and ending December 31, 2008, is June 30, 2008. An adjustment factor of 1.01766 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 2008 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. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 national average hourly wage (unadjusted for occupational mix) is $36.2784. 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 average hourly wage (unadjusted for occupational mix) of $15.3899 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 which is listed in section VI. of the Addendum to this final rule and available via the Internet. In the FY 2012 IPPS/LTCH PPS proposed rule, we made no proposals for changing our policies pertaining to the rural floor provision. However, we received several public comments, particularly regarding the FY 2012 rural floor wage index for Massachusetts, which was discussed in section VI.B.7. of Appendix A (76 FR 26059 and 26060) as part of the regulatory impact analysis for the proposed rule. Comment: Some commenters stated that CMS had correctly calculated the Massachusetts rural floor wage index in accordance with existing law and regulations. One commenter agreed with the basic policy and premise of the rural floor limit but opined that all hospitals VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 in Massachusetts receiving a significant increase in Medicare revenues as a result of a small hospital converting to an acute care provider is inconsistent with the intent and spirit of the law. The commenter suggested that CMS revisit its regulatory and policy options as it relates to section 4410 of the BBA. The MedPAC stated that the Massachusetts rural floor situation is suggestive of why a new wage index system is needed, adding that the current system is not equitable because extra payments made to hospitals receiving such exceptions are budget neutral; therefore, all hospitals must absorb the cost. A national hospital association requested that CMS provide a table indicating the state-by-state impact of the rural floor provision for providers in each state, including a schedule of what the area wage indexes would be if the rural floor was not applied. The commenter also suggested that CMS publish this information annually. Response: Beginning with this FY 2012 IPPS–LTCH final rule, we are including in the impact section of Appendix A of both the proposed and final rules a table indicating State level impacts of the rural floor provision. For FY 2012, this table includes the impacts of both the rural and imputed floors, as discussed under section III.F.2. of this preamble. In addition, we are revising Table 4D of the Addendum, which specifies the wage index for States or urban areas receiving the frontier, rural, or imputed floor, to include a column indicating the pre-floor area wage index. We will consider the commenters’ other suggestions as part of our development of the Report to Congress on reforming the wage index, required by section 3137(b) of the Affordable Care Act and due to the Congress by December 31, 2011. 2. Imputed Floor Policy In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25878 and 25879), we discussed the expiration of the imputed floor policy. (We refer readers to FY 2005 IPPS final rule (69 FR 49109 through 49111) for an explanation of CMS’ adoption of the ‘‘imputed’’ floor as a temporary 3-year regulatory measure to address concerns that hospitals in all-urban States were disadvantaged by the absence of rural hospitals to set a wage index floor in those States; the FY 2008 IPPS final rule with comment period (72 FR 47321) for a discussion of the extension of the imputed floor through FY 2008; and the FY 2009 IPPS final rule (73 FR 48570 through 48574 and 48584) for a discussion of the extension of the PO 00000 Frm 00119 Fmt 4701 Sfmt 4700 51593 imputed floor for an additional 3 years, through FY 2011, due to applying statewide budget neutrality for the rural and imputed floors.) As noted in the FY 2012 IPPS/LTCH PPS proposed rule and the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160), section 3141 of the Affordable Care Act replaced the statewide budget neutrality policy and required that budget neutrality for the rural and imputed floor be applied ‘‘through a uniform, national adjustment to the area wage index’’ instead of within each State beginning in FY 2011. However, the Affordable Care Act did not include a provision to extend the imputed floor or to make the imputed floor permanent. As discussed in the FY 2008 IPPS proposed rule and final rule with comment period (72 FR 24786 and 72 FR 47322, respectively), the application of the national budget neutrality requirement for the rural and imputed floors requires a transfer of payments from hospitals in States with rural hospitals but where the rural floor is not applied to hospitals in States where the rural or imputed floor is applied. In the final FY 2012 wage index, the rural floor will apply to 297 hospitals in 29 States. Continuing the imputed floor policy into FY 2012 results in an imputed floor applied for 39 hospitals in New Jersey. In the FY 2012 IPPS/LTCH PPS proposed rule, we did not propose to extend the imputed floor but sought public comments regarding the expiration of the imputed floor. Comment: Although a few commenters, including a national hospital association, supported CMS making no proposal to extend the imputed floor policy and agreed that this type of floor benefits only one State at the expense of all others, applies even though there are no rural areas in the State, and should apply only when required by statute, several commenters requested that CMS extend the current imputed floor policy. These commenters, including a national hospital association and a few State hospital associations, noted that, absent any new wage index policies that address the original need for the imputed floor, an imputed floor should be continued. Some of the commenters suggested that CMS make the imputed floor policy permanent. They asserted that hospitals in all-urban States suffer financial and competitive disadvantages, and they believed that CMS’ permanent adoption of an imputed floor policy would remedy these disadvantages. The commenters stated that other States could potentially benefit from the imputed floor in the future should their circumstances E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51594 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations change, and the fact that only one State currently benefits from the policy should not serve as CMS’ rationale for eliminating it. One commenter also suggested that if the imputed floor is to expire, it should be phased out over several years to avoid dramatic cost cutting and elimination of vital services. Response: In response to commenters’ concerns regarding the proposed September 30, 2011 expiration of the imputed floor, we have decided to extend the policy for 2 additional years, for FYs 2012 and 2013 (that is, through September 30, 2013), after which time we will reevaluate the policy. We believe that continuing the current imputed floor policy through FY 2013 is a reasonable accommodation for the hospitals that have benefited from the imputed floor. Also, a 2-year extension period coincides with the requirement under section 3137(c) of Public Law 111–148 that CMS must apply the reclassification average hourly wage comparison standards that were in place during FY 2008 ‘‘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 reforming the wage index under 3137(b) of Public Law 111–148.’’ (We refer readers to a complete discussion of this requirement in the FY 2011 IPPS/LTCH PPS supplemental proposed rule (75 FR 30919).) The report to Congress is due by December 31, 2011. Therefore, because the first fiscal year beginning after December 31, 2012 (a year after the report to Congress is due) starts on October 1, 2013, CMS cannot make any changes to the reclassification average hourly wage comparison standards before FY 2014. Given our current study of the entire wage index system, including geographic reclassification and the rural and imputed floor policies, we believe it is reasonable to continue the current imputed floor policy through the same evaluation period specified under section 3137(c) of Public Law 111–148. Therefore, in this FY 2012 final rule, we are providing an extension of the current imputed floor policy, including a national budget neutrality adjustment, through FY 2013 (that is, through September 30, 2013). Accordingly, we also have revised the Medicare regulations in § 412.64(h)(4) to reflect this extension. We note that, although the extension of the imputed floor policy in this final rule is partially based on the due date of the report to Congress under section 3137(b) of Public Law 111–148 and the time period for which CMS is prohibited from making any changes to the FY 2008 reclassification average hourly wage VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 comparison standards, under 3137(c) of Public Law 111–148, this extension of the imputed floor policy is effective through the end of FY 2013, regardless of any changes that may be subsequently made pursuant to these statutory provisions. Thus, the final FY 2012 wage index and impact tables associated with this final rule and published on CMS’ Web site include the application of the imputed floor policy and a national budget neutrality adjustment for the imputed floor. As mentioned above, 39 providers in New Jersey will receive an increase in their FY 2012 wage index due to the imputed floor policy. 3. FY 2012 Puerto Rico Wage Index We note that, for the FY 2012 wage index, there is one new hospital in rural Puerto Rico when previously there were none. However, this hospital has no cost reporting period beginning during FY 2008 and, therefore, has no wage data for inclusion in the FY 2012 wage index calculation for rural Puerto Rico. We discussed in the FY 2005 IPPS final rule that the imputed floor policy in § 412.64(h)(4) of the regulations does not apply to Puerto Rico hospitals (69 FR 49111). (We note that in this discussion in the FY 2012 IPPS/LTCH PPS proposed rule, we incorrectly stated that the imputed floor policy would apply to Puerto Rico. We have revised the discussion in the preamble of this final rule to accurately reflect our policies.) However, we adopted the policy in the FY 2008 IPPS final rule with comment period (72 FR 47323) that if there are no hospitals’ cost report wage data available to calculate a State’s rural floor, and the imputed floor policy has expired (or, in the case of Puerto Rico, the imputed floor is not applicable), ‘‘we will use the unweighted average of the wage indices from all CBSAs (urban areas) that are contiguous to the rural counties of the State to compute the State’s rural floor. (We define contiguous as sharing a border.)’’ Except for Fajardo, Puerto Rico (CBSA 21940), all other Puerto Rico urban areas are contiguous to a rural area. Therefore, based on our existing policy, the FY 2012 rural Puerto Rico wage index is calculated based on the average of the FY 2012 wage indices for the following urban areas: Aguadilla´ Isabela-San Sebastian, PR (CBSA 10380); Guayama, PR (CBSA 25020); ¨ Mayaguez, PR (CBSA 32420); Ponce, PR ´ (CBSA 38660), San German-Cabo Rojo, PR (CBSA 41900), San Juan-CaguasGuaynabo, PR (CBSA 41980), and Yauco, PR (CBSA 49500). PO 00000 Frm 00120 Fmt 4701 Sfmt 4700 G. Analysis and Implementation of the Occupational Mix Adjustment and the FY 2012 Occupational Mix Adjusted Wage Index As discussed in section III.C. of this preamble, for FY 2012, we apply the occupational mix adjustment to 100 percent of the FY 2012 wage index. We calculated the occupational mix adjustment using data from the 2007– 2008 occupational mix survey data, using the methodology described in section III.C.3. of this preamble. Using the occupational mix survey data and applying the occupational mix adjustment to 100 percent of the FY 2012 wage index results in a national average hourly wage of $36.2481 and a Puerto-Rico specific average hourly wage of $15.4142. After excluding data of hospitals that either submitted aberrant data that failed critical edits, or that do not have FY 2008 Worksheet S– 3 cost report data for use in calculating the FY 2012 wage index, we calculated the FY 2012 wage index using the occupational mix survey data from 3,168 hospitals. Using the Worksheet S– 3 cost report data of 3,489 hospitals and occupational mix survey data from 3,168 hospitals represents a 90.8 percent survey response rate. The FY 2012 national average hourly wages for each occupational mix nursing subcategory as calculated in Step 2 of the occupational mix calculation are as follows: Occupational mix nursing subcategory Average hourly wage National RN ........................ National LPN and Surgical Technician ....................... National Nurse Aide, Orderly, and Attendant ........ National Medical Assistant National Nurse Category .... $36.075785685 20.860811964 14.619464256 16.443954736 30.463606009 The national average hourly wage for the entire nurse category as computed in Step 5 of the occupational mix calculation is $30.463606009. 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations employees in the nurse category is 44.31 percent, and the national percentage of hospital employees in the all other occupations category is 55.69 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 FY 2012 occupational mix adjusted wage indices for each CBSA to the unadjusted wage indices for each CBSA. As a result of applying the occupational mix adjustment to the wage data, the wage index values for 209 (53.5 percent) urban areas and 32 (66.7 percent) rural areas would increase. One hundred nine (27.9 percent) urban areas would increase by 1 percent or more, and 5 (1.3 percent) urban areas would increase by 5 percent or more. Seventeen (35.4 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 182 (46.5 percent) urban areas and 16 (33.3 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 (14.6 percent) rural areas would decrease by 1 percent or more, and no rural areas would decrease by 5 percent or more. The largest positive impacts are 7.83 percent for an urban area and 2.91 percent for a rural area. The largest negative impacts are 4.45 percent for an urban area and 2.78 percent for a rural area. No urban or rural areas are unaffected. These results indicate that a larger percentage of rural areas (66.7 percent) would benefit from the occupational mix adjustment than do urban areas (53.5 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 (33.3 percent) of rural CBSAs would still experience a decrease in their wage indices as a result of the occupational mix adjustment. The wage index values for FY 2012 (except those for hospitals receiving wage index adjustments under section 1886(d)(13) of the Act) included in Tables 4A, 4B, 4C, and 4F, which are listed in section VI. of the Addendum to this final rule and available via the Internet, include the occupational mix adjustment. Tables 3A and 3B, which are listed in section VI. of the Addendum to this final rule and available via the Internet, list the 3-year average hourly wage for each labor market area before the redesignation or reclassification of VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 hospitals based on FYs 2010, 2011, and 2012 cost reporting periods. Table 3A lists these data for urban areas, and Table 3B lists these data for rural areas. In addition, Table 2, which is listed in section VI. of the Addendum to this final rule and available via the Internet, includes the adjusted average hourly wage for each hospital from the FY 2006 and FY 2007 cost reporting periods, as well as the FY 2008 period used to calculate the FY 2012 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 average hourly wages in Tables 2, 3A, and 3B, which are listed in section VI. of the Addendum to this final rule and available via the Internet, include the occupational mix adjustment. The wage index values in Tables 4A, 4B, 4C, and 4D also include the national rural and imputed floor budget neutrality adjustment. H. 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. (We refer readers to a discussion of the proximity requirements in the FY 2002 IPPS final rule (66 FR 39874 and 39875).) 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 PO 00000 Frm 00121 Fmt 4701 Sfmt 4700 51595 hourly wage data from the 3 most recently published hospital wage surveys in evaluating a hospital’s reclassification application for FY 2003 and any succeeding fiscal year. Section 304(b) of Public Law 106–554 provides that the Secretary must establish a mechanism under which a statewide entity may apply to have all of the geographic areas in the State treated as a single geographic area for purposes of computing and applying a single wage index, for reclassifications beginning in FY 2003. The implementing regulations for this provision are located at 42 CFR 412.235. Section 1886(d)(8)(B) of the Act requires the Secretary to treat a hospital located in a rural county adjacent to one or more urban areas as being located in the labor market area to which the greatest number of workers in the county commute, if the rural county would otherwise be considered part of an urban area under the standards for designating MSAs and if the commuting rates used in determining outlying counties were determined on the basis of the aggregate number of resident workers who commute to (and, if applicable under the standards, from) the central county or counties of all contiguous MSAs. In light of the CBSA definitions and the Census 2000 data that we implemented for FY 2005 (69 FR 49027), we undertook to identify those counties meeting these criteria. Eligible counties are discussed and identified under section III.H.5. of this preamble. 2. Effects of Reclassification/ Redesignation Section 1886(d)(8)(C) of the Act provides that the application of the wage index to redesignated hospitals is dependent on the hypothetical impact that the wage data from these hospitals would have on the wage index value for the area to which they have been redesignated. These requirements for determining the wage index values for 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51596 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations wage data for the redesignated hospitals applies to the redesignated hospitals. • If including the wage data for the redesignated hospitals reduces the wage index value for the area to which the hospitals are redesignated by more than 1 percentage point, the area wage index determined inclusive of the wage data for the redesignated hospitals (the combined wage index value) applies to the redesignated hospitals. • If including the wage data for the redesignated hospitals increases the wage index value for the urban area to which the hospitals are redesignated, both the area and the redesignated hospitals receive the combined wage index value. Otherwise, the hospitals located in the urban area receive a wage index excluding the wage data of hospitals redesignated into the area. • Rural areas whose wage index values would be reduced by excluding the wage data for hospitals that have been redesignated to another area continue to have their wage index values calculated as if no redesignation had occurred (otherwise, redesignated rural hospitals are excluded from the calculation of the rural wage index). The wage index value for a redesignated rural hospital cannot be reduced below the wage index value for the rural areas of the State in which the hospital is located. CMS also has adopted the following policies: • The wage data for a reclassified urban hospital is included in both the wage index calculation of the urban area to which the hospital is reclassified (subject to the rules described above) and the wage index calculation of the urban area where the hospital is physically located. • In cases where hospitals have reclassified to rural areas, such as urban hospitals reclassifying to rural areas under 42 CFR 412.103, the hospital’s wage data are: (a) included in the rural wage index calculation, unless doing so would reduce the rural wage index; and (b) included in the urban area where the hospital is physically located. The effect 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 all hospitals reclassified into the rural area. In addition, in accordance with the statutory language referring to ‘‘hospitals’’ in the plural under sections 1886(d)(8)(C)(i) and 1886(d)(8)(C)(ii) of the Act, our longstanding policy is to consider reclassified hospitals as a group when deciding whether to include or exclude them from both urban and rural wage index calculations. 3. FY 2012 MGCRB Reclassifications a. FY 2012 Reclassification 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 2012 reclassification requests. Based on such reviews, there were 280 hospitals approved for wage index reclassifications by the MGCRB for FY 2012. Because MGCRB wage index reclassifications are effective for 3 years, for FY 2012, hospitals reclassified during FY 2010 or FY 2011 are eligible to continue to be reclassified to a particular labor market area based on such prior reclassifications. There were 283 hospitals approved for wage index reclassifications in FY 2010 and 294 hospitals approved for wage index reclassifications in FY 2011. Of all of the hospitals approved for reclassification for FY 2010, FY 2011, and FY 2012, based upon the review at the time of this final rule, 659 hospitals are in a reclassification status for FY 2012. 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. CMS became aware that an error was made in the calculation of the proposed wage index out-migration adjustment in Table 4J of the FY 2012 IPPS/LTCH PPS proposed rule. This error in the calculation affected 104 providers that became eligible to receive the outmigration adjustment. We published a correction notice in the Federal Register on July 13, 2011 (76 FR 41178), which had a display date of July 11, 2011, announcing the corrections to the tables. Additionally, we issued a letter to hospitals on July 1, 2011, through their fiscal intermediaries/MACs advising that we extended the 45-day deadline PO 00000 Frm 00122 Fmt 4701 Sfmt 4700 and allowed hospitals a 7-day period from the date of display of the correction notice (that is, by July 18, 2011) for hospitals that wished to request a revision to an already submitted withdrawal/termination request under 42 CFR 412.73, or that wished to request a withdrawal of a reclassification or termination of an existing 3-year section 1886(d)(10) reclassification that would be effective in FY 2012. Hospitals also may cancel prior reclassification withdrawals or terminations in certain circumstances. For further information about withdrawing, terminating, or canceling a previous withdrawal or termination of a 3-year reclassification for wage index purposes, we refer the reader to 42 CFR 412.273, as well as the FY 2002 IPPS final rule (66 FR 39887) and the FY 2003 IPPS final rule (67 FR 50065). 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 2012 are incorporated into the wage index values published in the FY 2012 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. b. Applications for Reclassifications for FY 2013 Applications for FY 2013 reclassifications are due to the MGCRB by September 1, 2011. We note that this is also the deadline for canceling a previous wage index reclassification withdrawal or termination under 42 CFR 412.273(d). Applications and other information about MGCRB reclassifications may be obtained, beginning in mid-July 2011, 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. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 51597 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, 2011, hospitals located in the rural county in the first column of this chart will be redesignated for purposes of using the wage index of the urban area listed in the second column. RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(d)(8)(B) OF THE ACT [Based on CBSAs and Census 2000 Data] mstockstill on DSK4VPTVN1PROD with RULES2 Rural county CBSA Cherokee, AL ............................................................................................ Macon, AL ................................................................................................ Talladega, AL ........................................................................................... Hot Springs, AR ........................................................................................ Windham, CT ............................................................................................ Bradford, FL .............................................................................................. Hendry, FL ................................................................................................ Levy, FL .................................................................................................... Walton, FL ................................................................................................ Banks, GA ................................................................................................ Chattooga, GA .......................................................................................... Jackson, GA. ............................................................................................ Lumpkin, GA. ............................................................................................ Morgan, GA .............................................................................................. Peach, GA ................................................................................................ Polk, GA ................................................................................................... Talbot, GA ................................................................................................ Bingham, ID .............................................................................................. Christian, IL .............................................................................................. DeWitt, IL .................................................................................................. Iroquois, IL ................................................................................................ Logan, IL ................................................................................................... Mason, IL .................................................................................................. Ogle, IL ..................................................................................................... Clinton, IN ................................................................................................. Henry, IN .................................................................................................. Spencer, IN ............................................................................................... Starke, IN .................................................................................................. Warren, IN ................................................................................................ Boone, IA .................................................................................................. Buchanan, IA ............................................................................................ Cedar, IA .................................................................................................. Allen, KY ................................................................................................... Assumption Parish, LA ............................................................................. St. James Parish, LA ................................................................................ Allegan, MI ................................................................................................ Montcalm, MI ............................................................................................ Oceana, MI ............................................................................................... Shiawassee, MI ........................................................................................ Tuscola, MI ............................................................................................... Fillmore, MN ............................................................................................. Dade, MO ................................................................................................. Pearl River, MS ........................................................................................ Caswell, NC .............................................................................................. Davidson, NC ........................................................................................... Granville, NC ............................................................................................ Harnett, NC ............................................................................................... Lincoln, NC ............................................................................................... Polk, NC ................................................................................................... Los Alamos, NM ....................................................................................... Lyon, NV ................................................................................................... Cayuga, NY .............................................................................................. Columbia, NY ........................................................................................... Genesee, NY ............................................................................................ Greene, NY ............................................................................................... Schuyler, NY ............................................................................................. Sullivan, NY .............................................................................................. Wyoming, NY ............................................................................................ Ashtabula, OH .......................................................................................... Champaign, OH ........................................................................................ VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00123 Fmt 4701 Rome, GA. Auburn-Opelika, AL. Anniston-Oxford, AL. Hot Springs, AR. Hartford-West Hartford-East Hartford, CT. Gainesville, FL. West Palm Beach-Boca Raton-Boynton, FL. Gainesville, FL. Fort Walton Beach-Crestview-Destin, FL. Gainesville, GA. Chattanooga, TN-GA. Atlanta-Sandy Springs-Marietta, GA. Atlanta-Sandy Springs-Marietta, GA. Atlanta-Sandy Springs-Marietta, GA. Macon, GA. Atlanta-Sandy Springs-Marietta, GA. Columbus, GA-AL. Idaho Falls, ID. Springfield, IL. Bloomington-Normal, IL. Kankakee-Bradley, IL. Springfield, IL. Peoria, IL. Rockford, IL. Lafayette, IN. Indianapolis-Carmel, IN. Evansville, IN-KY. Gary, IN. Lafayette, IN. Ames, IA. Waterloo-Cedar Falls, IA. Iowa City, IA. Bowling Green, KY. Baton Rouge, LA. Baton Rouge, LA. Holland-Grand Haven, MI. Grand Rapids-Wyoming, MI. Muskegon-Norton Shores, MI. Lansing-East Lansing, MI. Saginaw-Saginaw Township North, MI. Rochester, MN. Springfield, MO. Gulfport-Biloxi, MS. Burlington, NC. Greensboro-High Point, NC. Durham, NC. Raleigh-Cary, NC. Charlotte-Gastonia-Concord, NC-SC. Spartanburg, SC. Santa Fe, NM. Carson City, NV. Syracuse, NY. Albany-Schenectady-Troy, NY. Rochester, NY. Albany-Schenectady-Troy, NY. Ithaca, NY. Poughkeepsie-Newburgh-Middletown, NY. Buffalo-Niagara Falls, NY. Cleveland-Elyria-Mentor, OH. Springfield, OH. Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 51598 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(d)(8)(B) OF THE ACT— Continued [Based on CBSAs and Census 2000 Data] Rural county CBSA mstockstill on DSK4VPTVN1PROD with RULES2 Columbiana, OH ....................................................................................... Cotton, OK ................................................................................................ Linn, OR ................................................................................................... Adams, PA ................................................................................................ Clinton, PA ................................................................................................ Greene, PA ............................................................................................... Monroe, PA ............................................................................................... Schuylkill, PA ............................................................................................ Susquehanna, PA ..................................................................................... Clarendon, SC .......................................................................................... Lee, SC ..................................................................................................... Oconee, SC .............................................................................................. Union, SC ................................................................................................. Meigs, TN ................................................................................................. Bosque, TX ............................................................................................... Falls, TX ................................................................................................... Fannin, TX ................................................................................................ Grimes, TX ............................................................................................... Harrison, TX ............................................................................................. Henderson, TX ......................................................................................... Milam, TX ................................................................................................. Van Zandt, TX .......................................................................................... Willacy, TX ................................................................................................ Buckingham, VA ....................................................................................... Floyd, VA .................................................................................................. Middlesex, VA ........................................................................................... Page, VA .................................................................................................. Shenandoah, VA ...................................................................................... Island, WA ................................................................................................ Mason, WA ............................................................................................... Wahkiakum, WA ....................................................................................... Jackson, WV ............................................................................................. Roane, WV ............................................................................................... Green, WI ................................................................................................. Green Lake, WI ........................................................................................ Jefferson, WI ............................................................................................ Walworth, WI ............................................................................................ As in the past, hospitals redesignated under section 1886(d)(8)(B) of the Act are also eligible to be reclassified to a different area by the MGCRB. Affected hospitals were permitted to compare the reclassified wage index for the labor market area in Table 4C (which was listed in section VI. of the Addendum to the proposed rule and available via the Internet) 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 2012 proposed rule. As discussed in section III.H.3.a. of this preamble, we published a correction notice in the Federal Register on July 13, 2011 (76 FR 41178), which had a display date of July 11, 2011, announcing corrections to the FY 2012 proposed out-migration adjustment in Table 4J. Additionally, we issued a letter to hospitals on July 1, 2011, VerDate Mar<15>2010 19:46 Aug 17, 2011 Jkt 223001 Youngstown-Warren-Boardman, OH-PA. Lawton, OK. Corvallis, OR. York-Hanover, PA. Williamsport, PA. Pittsburgh, PA. Allentown-Bethlehem-Easton, PA-NJ. Reading, PA. Binghamton, NY. Sumter, SC. Sumter, SC. Greenville, SC. Spartanburg, SC. Cleveland, TN. Waco, TX. Waco, TX. Dallas-Plano-Irving, TX. College Station-Bryan, TX. Longview, TX. Dallas-Plano-Irving, TX. Austin-Round Rock, TX. Dallas-Plano-Irving, TX. Brownsville-Harlingen, TX. Charlottesville, VA. Blacksburg-Christiansburg-Radford, VA. Virginia Beach-Norfolk-Newport News, VA. Harrisonburg, VA. Winchester, VA-WV. Seattle-Bellevue-Everett, WA. Olympia, WA. Longview, WA. Charleston, WV. Charleston, WV. Madison, WI. Fond du Lac, WI. Milwaukee-Waukesha-West Allis, WI. Milwaukee-Waukesha-West Allis, WI. through their fiscal intermediaries/ MACs advising that we extended the 45day deadline and allowed hospitals a 7day period from the date of display of the correction notice (that is, by July 18, 2011) for hospitals redesignated under section 1886(d)(8)(B) of the Act that also were eligible for an out-migration adjustment to notify CMS that they wished to receive the out-migration adjustment instead of their redesignation under section 1886(d)(8)(B) of the Act. Section 1886(d)(8)(B) hospitals that had already notified CMS that they wished to receive the out-migration adjustment instead of the section 1886(d)(8)(B) redesignation could withdraw such notifications. 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 PO 00000 Frm 00124 Fmt 4701 Sfmt 4700 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, beginning with reclassifications for the FY 2011 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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 Medicare and Medicaid Extenders Act of 2010 (Pub. L. 111–309) on December 15, 2010, the extension of the 508 provision was included in sections 3137(a) and 10317 of the Affordable Care Act (Pub. L. 111–148). Section 3137 of the Affordable Care Act extended, through FY 2010, section 508 reclassifications as well as certain special exceptions. The most recent extension of the provision was included in section 102 of the Medicare and Medicaid Extender Act, which extends, through FY 2011, section 508 reclassifications as well as certain special exceptions. The latest extension of these provisions expires on September 30, 2011, and will no longer be applicable effective with FY 2012. 7. Waiving Lugar Redesignation for the Out-Migration Adjustment We have received several inquiries regarding the effect on a hospital’s VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 deemed urban status when a hospital waives its reclassification under section 1886(d)(8) of the Act in order to accept an out-migration adjustment to the wage index under section 1886(d)(13) of the Act. (We refer readers to a discussion of the out-migration adjustment under section III.I. of the preamble of this final rule.) In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25885 and 25886), we clarified that Lugar hospitals will be required to waive their Lugar urban status in its entirety in order to receive the out-migration adjustment. We stated our belief that this represents one permissible reading of the statute, given that section 1886(d)(13)(G) of the Act states that a hospital with an outmigration adjustment is not ‘‘eligible’’ for a reclassification under subsection (8). Therefore, beginning with FY 2012, we proposed that an eligible hospital that waives its Lugar status in order to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the DSH payment adjustment, effective for the fiscal year in which the hospital receives the outmigration adjustment. (We refer readers to a discussion of DSH payment adjustment under section IV.G. of this preamble.) In addition, we proposed to make a minor procedural change that would allow a Lugar hospital that qualifies for and accepts the out-migration adjustment (through written notification to CMS within the requisite number of days from the publication of the proposed rule 4) to automatically waive its urban status for the 3-year period for which its out-migration adjustment is effective. That is, such a Lugar hospital would no longer be required during the second and third years of eligibility for the out-migration adjustment to advise us annually that it prefers to continue being treated as rural and receive the adjustment. We made this proposal in response to public comments we received on the FY 2011 IPPS/LTCH PPS proposed rule that discussed the burden of this annual request (74 FR 43840). Thus, under the proposed procedural change, a Lugar hospital that requests to waive its urban status in order to receive the rural wage index in 4 Hospitals generally have 45 days from publication of the proposed rule to request an outmigration adjustment in lieu of the section 1886(d)(8) deemed urban status. As noted in sections III.H.3. and III.H.4. of this preamble, due to the correction of the FY 2012 proposed outmigration adjustment, we extended the 45 day deadline and allowed hospitals a 7-day period from the date of display of the July 13, 2011 correction notice (that is, by July 18, 2011) (76 FR 41178). PO 00000 Frm 00125 Fmt 4701 Sfmt 4700 51599 addition to the out-migration adjustment would be deemed to have accepted the out-migration adjustment and agrees to be treated as rural for the duration of its 3-year eligibility period, unless prior to its second or third year of eligibility the hospital explicitly notifies CMS in writing, within the required period (generally 45 days from the publication of the proposed rule), that it instead elects to return to its deemed urban status and no longer wishes to accept the out-migration adjustment. Comment: Commenters supported CMS’ proposed policy clarification that an eligible hospital that waives its Lugar status in order to receive the outmigration adjustment has effectively waived its deemed urban status and, thus, is rural for all IPPS purposes. Some of the commenters stated that this policy provides the flexibility necessary to allow hospitals to revert to their true rural status if they wish. Commenters also supported the proposed minor procedural change that would allow a Lugar hospital that qualifies for and accepts the out-migration adjustment to automatically waive its urban status for the 3-year period for which its outmigration adjustment is effective. Some commenters asked CMS to clarify whether the procedural change will apply to letters already filed for the FY 2012 update, in which a request was made to waive Lugar redesignation and to instead receive the out-migration adjustment. Response: Beginning with FY 2012, we are adopting as final the policy that an eligible hospital that waives its Lugar status in order to receive the outmigration adjustment has waived its deemed urban status and, thus, is rural for all IPPS purposes. In addition, we are adopting as final the procedural change that would allow a Lugar hospital that qualifies for and accepts the out-migration adjustment to automatically waive its urban status for the 3-year period for which the outmigration adjustment is effective. This clarified policy and procedural change will be effective beginning with the FY 2013 wage index. Therefore, hospitals that sent requests to waive Lugar status for the out-migration adjustment for FY 2012, and still have 2 or 3 years of eligibility available for the out-migration adjustment, must request again next year for the waiver to apply to the FY 2013 wage index. That request would be effective for the remaining years of its eligibility. At the time hospitals made their decisions with respect to waiving Lugar status for the out-migration adjustment for FY 2012, the procedural change E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51600 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations allowing a 3-year waiver was not yet in effect. Therefore, those decisions were based on the existing policy in place for the proposed rule, which required annual waivers. As discussed in section III.H.4. of this preamble, counties remain eligible for a consistent outmigration adjustment for a period of 3 years. Each year, we revise the list of counties to (1) add new counties eligible for an adjustment for 3 years; (2) remove counties where 3 years have elapsed and the counties no longer qualify for an adjustment; or (3) revise the adjustment value for counties in cases where 3 years have elapsed and the counties, once again, qualify for an adjustment. Some hospitals may not know whether they are in the first, second, or third year of the out-migration adjustment; and therefore, whether they are able to waive deemed urban Lugar status for 1, 2, or 3 years. For these reasons, beginning with FY 2013, we intend to make available, shortly after we publish the proposed rule, a public use file which will list Lugar/out-migration hospitals (that is, hospitals that have Lugar status and are located in a county that qualifies for an out-migration adjustment), and which will identify whether the hospital is in its first, second, or third year of eligibility for the out-migration adjustment. We will update this file annually and release it to the public after each fiscal year’s proposed rule. Comment: Some commenters expressed concerns with respect to hospitals reclassified from urban to rural under section 1886(d)(8)(E) of the Act (§ 412.103 of the regulations). The commenters expressed concern that a hospital reclassified from urban to rural status under § 412.103 has to cancel this reclassification to return to Lugar status, so that it can then waive its Lugar status to become rural and retain a special rural status (such as SCH or MDH), and also receive the out-migration adjustment. However, a § 412.103 cancellation takes effect only at the beginning of the next cost reporting period, whereas waiving Lugar status is effective on October 1. The commenters indicated that this presents a problem for hospitals that do not have a September 30 cost reporting period end date. The commenters urged CMS to create a process by which hospitals can simultaneously cancel a § 412.103 reclassification and waive Lugar status. Response: In circumstances where a Lugar hospital has acquired rural status through § 412.103 in order to be classified by Medicare as an SCH or a MDH, we will allow the act of waiving Lugar status for the out-migration adjustment to simultaneously waives VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 the hospital’s deemed urban status and cancel the hospital’s acquired rural status, thus treating the hospital as a rural provider effective on October 1. (We note that there are special rules that apply to rural referral centers under § 412.103(g)(1) requiring that urban-torural status be maintained for a certain period of time, in order to avoid gaming situations. We are not revising these rules for rural referral centers due to these considerations.) Comment: Some commenters asked for a policy that would allow waivers of Lugar redesignation in all instances— not just when a hospital is eligible for the out-migration adjustment. Response: The statute provides two methods for a Lugar hospital to be treated as rural for Medicare payment purposes: (1) If the hospital is eligible for an out-migration adjustment under section 1886(d)(13) of the Act; or (2) if the hospital applies for an urban to rural reclassification under section 1886(d)(8)(E) of the Act. There are no other provisions under the Medicare statute that would allow a Lugar hospital to be treated as a rural provider, given that Lugar status is a deemed status. 8. Other Geographic Reclassification Issues a. Requested Reclassification for Single Hospital MSAs Section 412.230 of the regulations sets forth criteria for an individual hospital to apply for geographic reclassification to a higher rural or urban wage index area. Specifically, under § 412.230(a)(3)(ii), an individual hospital may be redesignated from an urban area to another urban area, from a rural area to another rural area, or from a rural area to an urban area for the purpose of using the other area’s wage index value. Such a hospital must also meet other criteria. One required criterion (under § 412.230(d)(1)(iii)(C) of the regulations) is that the hospital must demonstrate that its own average hourly wage is higher than the average hourly wage of hospitals in the area in which the hospital is located (108 percent for urban hospitals and 106 percent for rural hospitals). In cases in which a hospital wishing to reclassify is the only hospital in its MSA, that hospital is unable to satisfy this criterion because it cannot demonstrate that its average hourly wage is higher than that of the other hospitals in the area in which the hospital is located (because there are no other hospitals in the area). For hospitals in the category described above, our current policy provides an alternative that allows hospitals to seek PO 00000 Frm 00126 Fmt 4701 Sfmt 4700 reclassification using the group reclassification rules under § 412.232 or § 412.234. Specifically, if a hospital is the single hospital in its area for the 3year period over which the average hourly wage is calculated for the purpose of the comparison under § 412.230(d)(1)(iii)(C), the hospital may apply for geographic reclassification as a single hospital county group in accordance with the procedures set forth at § 412.232 or § 412.234. In addition to specifying the average hourly wage criteria, these regulations state that the county in which the hospital is located must be adjacent to the urban area to which it seeks redesignation. In addition, a certain level of economic integration needs to exist between the two areas. For example, for urban county group reclassifications (for FY 2008 and subsequent periods), § 412.234(a)(3)(iv) states that ‘‘hospitals located in counties that are in the same Combined Statistical Area (CSA) or Core-Based Statistical Area (CBSA) * * * as the urban area to which they seek redesignation qualify as meeting the proximity requirements for reclassification to the urban area to which they seek redesignation.’’ Recently, we have been advised of a single hospital MSA scenario of concern to a particular hospital. In this scenario, an urban hospital located in an area in which there was only one other hospital had previously applied for and was granted a reclassification by the MGCRB to an adjacent urban area with a higher wage index. During the 3-year reclassification timeframe, the other hospital in its labor market area closed. After the expiration of its reclassification, the hospital became ineligible for reclassification to that same adjacent urban area with a higher wage index because it was no longer able to satisfy the wage data comparison criteria to reclassify individually under § 412.230(d)(1)(iii)(C). In addition, the hospital could not apply for redesignation under the urban county group regulation at § 412.234 because the hospital was not located in the same CSA or CBSA as the urban area to which it sought reclassification. In this example, the concern that was shared with CMS was that the hospital was competitively disadvantaged in competing for labor with neighboring hospitals where the hospital had a comparable average hourly wage, compared to the other hospitals in its surrounding area, because it receives a lower wage index. We stated in the proposed rule that we believe that the geographic reclassification regulations should not E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations be revised to accommodate this situation. We discussed the fact that we have repeatedly rejected special rules to accommodate single hospital MSAs (69 FR 48915, 49109; 71 FR 47869, 48071 and 48072). In these explanations, we have highlighted the fact that hospitals in single hospital MSAs not only may be eligible for out-commuting adjustments, but that they also may apply to an adjacent MSA within the same CSA using the group reclassification rules without meeting the 108-percent test. We explained that each year we propose to adopt the OMB’s statistical area definitions (75 FR 50162), so if a hospital in a single hospital MSA cannot meet group reclassification criteria because of the CSA standard, it means that OMB has determined that there is not a sufficient degree of employment interchange to suggest that the areas compete for the same labor. In addition, we explained that when we originally adopted the 108-percent test, we noted that ‘‘with respect to single hospital MSAs, a hospital in such an MSA receives a wage index value that is based entirely on its own wage data and, therefore, its actual wage levels. Because such a hospital is clearly not disadvantaged by its inclusion in a labor market area where its wage index is determined based on its own wage levels, it is appropriate under this guideline that a hospital should not be reclassified if it is the only one in its area’’ (57 FR 39746). In the proposed rule, we expressed concern that allowing a hospital representing 100 percent of its area’s wages to be exempt from the wage data comparison test could undermine the 108-percent test for hospitals in other circumstances where the standard cannot be met. Finally, we referred to section 3137(c) of the Affordable Care Act, which prohibits us from altering average hourly wage comparison criteria for FY 2012. That provision states that ‘‘notwithstanding any other provision of law,’’ the MGCRB is required to use the ‘‘average hourly wage comparison criteria used in making such decisions as of September 30, 2008,’’ until the first fiscal year beginning on the date that is one year after the Secretary submits a report to Congress. In the proposed rule, we solicited public comments on this issue. In particular, we invited comments on the types of regulatory solutions that could be made available to a hospital in this type of situation. Comment: Commenters suggested that, among other solutions to this issue, the 108 percent test should be waived for hospitals that are the single hospital in the MSA, as it is mathematically VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 impossible to be 108 percent of your own average hourly wage. In addition, commenters suggested that establishing one’s own wage index or being eligible for an out-migration adjustment may not result in adequate compensation for a hospital’s services. Commenters also noted that, despite the existing remedies of the out-migration adjustment and county group reclassification, a hospital may still be at a disadvantage and unable to compete for labor with a neighboring labor market area that receives a higher wage index. Commenters believed that Congress did not intend to exclude a hospital in a single hospital MSA from the ability to reclassify to another labor market area. Commenters further stated that recognizing county boundaries does not always accurately reflect labor markets, which is why in 1989 Congress established the reclassification process. Therefore, commenters believed the very purpose of Congress creating the reclassification process, that is, to give hospitals an opportunity to be included in a labor market area in which they compete for labor, is not being fulfilled by excluding a hospital in a single hospital MSA the ability to seek reclassification. Response: While we continue to be concerned regarding the precedent that might be set by exempting a category of hospitals from the 108 percent test, we agree that the current policies for geographic reclassification are disparate for hospitals located in single hospital MSAs compared to hospitals located in multiple hospital MSAs. We acknowledge the commenters’ views that this disparity is sometimes a disadvantage because hospitals in single hospital MSAs have fewer options for qualifying for geographic reclassification than hospitals in multiple hospital MSAs. To address the concerns of the commenters, in this final rule, we are making a change in our policy in order to waive a hospital in a single hospital MSA from the average hourly wage comparison criterion under § 412.230(d)(1)(iii)(C) beginning with applications for geographic reclassification for the FY 2013 wage index. That is, a hospital in a single hospital MSA will be exempt from meeting the 108 percent average hourly wage criterion. Accordingly, we are amending our regulation at § 412.230 by adding a new paragraph (d)(5) to reflect this exception for single hospital MSAs. We note that section 3137(b) of Public Law 111–148 requires CMS to submit a report on reforming the wage index to Congress by December 31, 2011. As a result of this statutory PO 00000 Frm 00127 Fmt 4701 Sfmt 4700 51601 requirement, we are currently studying of the entire wage index system, including geographic reclassification. Although we are adopting this new policy for hospitals in single hospital MSAs for reclassification applications starting with FY 2013, we may reevaluate this policy as we formulate a plan to reform the wage index system under the requirements of section 3137(b). b. Requests for Exceptions to Geographic Reclassification Rules Over the last several years, CMS has received numerous requests for exceptions to current Medicare law and regulation regarding geographic reclassification or requests to revise the existing regulations in order to allow a hospital or group of hospitals the ability to reclassify to a labor market area with a higher wage index. Section 3137(b) of the Affordable Care Act requires the Secretary to submit a report to Congress that includes a ‘‘plan to reform the hospital wage index.’’ This report to Congress is due by December 31, 2011. As part of our efforts in this regard, in the FY 2012 IPPS/LTCH PPS proposed rule, we solicited public comments, to be considered only as part of our report to Congress and not to be addressed in the FY 2012 IPPS/LTCH PPS final rule, on ways to redefine the geographic reclassification requirements to more accurately define labor markets. I. FY 2012 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees In accordance with the broad discretion granted to the Secretary 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 hospital wage index changes during the 3-year period, and counties will receive the same wage index increase for those 3 years. However, a county that qualifies in any given year may not necessarily qualify E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51602 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations after the 3-year period, or it may qualify but receive a different adjustment to the wage index level. Hospitals that receive this adjustment to their wage index are not eligible for reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act. Adjustments under this provision are not subject to the budget neutrality requirements under section 1886(d)(3)(E) of the Act. Hospitals located in counties that qualify for the wage index adjustment are to receive an increase in the wage index that is equal to the average of the differences between the wage indices of the labor market area(s) with higher wage indices and the wage index of the resident county, weighted by the overall percentage of hospital workers residing in the qualifying county who are employed in any labor market area with a higher wage index. Beginning with the FY 2008 wage index, we use postreclassified wage indices when determining the out-migration adjustment (72 FR 47339). For the FY 2012 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 2011 will be eligible to retain the adjustment for FY 2012. For hospitals in newly qualified counties, adjustments to the wage index are effective for 3 years, beginning with discharges occurring on or after October 1, 2011. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 2011 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. Hospitals that reclassified under section 1886(d)(10) of the Act that wished to receive the out-migration adjustment, rather than their reclassification adjustment, had to follow the termination/withdrawal procedures specified in 42 CFR 412.273 and section III.H.3. of the preamble of the FY 2012 proposed rule. Otherwise, they were deemed to have waived the outmigration adjustment. Hospitals redesignated under section 1886(d)(8)(B) 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 2012 proposed rule that they elected to receive the outmigration adjustment instead. As noted in sections III.H.3.a. and III.H.4. of this preamble, due to the correction of the FY 2012 proposed outmigration adjustment, we extended the 45-day deadline and allowed hospitals a 7-day period from the date of display of the July 13, 2011 correction notice (that is, by July 18, 2011) (76 FR 41178). Table 4J, which is listed in section VI. of the Addendum to this final rule and available via the Internet, lists the outmigration wage index adjustments for FY 2012. Hospitals that are not otherwise reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act will automatically receive the listed adjustment. In accordance with the procedures discussed above, redesignated/reclassified hospitals will be deemed to have waived the outmigration adjustment unless CMS was otherwise notified within the timeframe stated above. 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, which is listed in section VI. of the Addendum to this final rule and available via the Internet. PO 00000 Frm 00128 Fmt 4701 Sfmt 4700 J. 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 2012 wage index were made available on October 4, 2010, 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 13, 2010, 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 4, 2010 wage and occupational mix data files, the hospital had to submit corrections along with complete, detailed supporting documentation to its fiscal intermediary/MAC by December 6, 2010. Hospitals were notified of this deadline and of all other 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 13, 2010 memorandum referenced above. In the October 13, 2010 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations documentation to its fiscal intermediary/MAC no later than December 6, 2010. The fiscal intermediaries/MACs notified the hospitals by mid-February 2011 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 2011. CMS published the proposed wage index public use files that included hospitals’ revised wage index data on February 22, 2011. Hospitals had until March 7, 2011, 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’ 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 13, 2011. 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 20, 2011. Hospitals were given the opportunity to examine Table 2, which is listed in section VI. of the Addendum to the proposed rule and available via the Internet. Table 2 contained each hospital’s adjusted average hourly wage used to construct the wage index values for the past 3 years, including the FY 2008 data used to construct the proposed FY 2012 wage index. We noted that the hospital average hourly wages shown in Table 2 only reflected changes made to a hospital’s data that were transmitted to CMS by March 2011. We released the final wage index data public use files in early May 2011 on the Internet at: https://www.cms.hhs.gov/ AcuteInpatientPPS/WIFN/list.asp. The May 2011 public use files were made available solely for the limited purpose of identifying any potential errors made by CMS or the fiscal intermediary/MAC in the entry of the final wage index data that resulted from the correction process described above (revisions submitted to CMS by the fiscal intermediaries/MACs by April 13, 2011). If, after reviewing the May 2011 final public use files, a hospital believed that its wage or VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 existed 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 6, 2011. 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. After the release of the May 2011 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 13, 2011. • Requests for correction of errors that were not, but could have been, identified during the hospital’s review of the February 22, 2011 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 6, 2011) were incorporated into the final wage index in the FY 2012 IPPS/LTCH PPS final rule, which will be effective October 1, 2011. 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 2012 payment rates. Accordingly, hospitals that did not meet the procedural deadlines set forth above will not be afforded a later opportunity to submit wage index data corrections or to dispute the fiscal intermediary’s (or, if applicable, the MAC’s) decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines set forth above will not be permitted to challenge later, before the PO 00000 Frm 00129 Fmt 4701 Sfmt 4700 51603 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 appeals 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 had access to the final wage index data by early May 2011, they had 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 2012 wage index by August 2011, and the implementation of the FY 2012 wage index on October 1, 2011. 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 6, 2011, 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 6 deadline for making corrections to the wage data for the following fiscal year’s wage index. This provision is not available to a hospital seeking to revise another hospital’s data that may be affecting the requesting hospital’s wage index for the labor market area. As indicated earlier, because CMS makes the wage index data available to hospitals on the CMS Web site prior to publishing both the proposed and final IPPS rules, and the fiscal intermediaries or the 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, E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51604 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 6, 2011 deadline for the FY 2012 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 6, 2011 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 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. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 K. Labor-Related Share for the FY 2012 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 wage-related 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, 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 PO 00000 Frm 00130 Fmt 4701 Sfmt 4700 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 this final rule, as we proposed, we are not making 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). Therefore, for FY 2012, we are continuing to use a labor-related share of 68.8 percent for discharges occurring on or after October 1, 2011. Tables 1A and 1B, which are published in section VI. of the Addendum to this final rule and available via the Internet, reflect 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 applied 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 applied 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, 2011. 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 laborrelated 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 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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. The Puerto Rico labor-related share of 62.1 percent for FY 2012 is reflected in the Table 1C, which is published in section VI. of the Addendum to this final rule and available via the Internet. IV. Other Decisions and Changes to the IPPS for Operating Costs and GME Costs A. Hospital Inpatient Quality Reporting (IQR) Program mstockstill on DSK4VPTVN1PROD with RULES2 1. Background a. Overview CMS is seeking to promote higher quality and more efficient healthcare 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 measures various aspects 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 Hospital Inpatient Quality Reporting (IQR) Program (formerly referred to as the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program). In addition, CMS has implemented quality reporting programs for hospital outpatient services, the Hospital Outpatient Quality Reporting (OQR) Program (formerly referred to as the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Hospital Outpatient Quality Data Reporting Program (HOP QDRP)), and for physicians and other eligible professionals, the Physician Quality Reporting System (formerly referred to as the Physician Quality Reporting Program 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 endstage renal disease quality incentive program (76 FR 628 through 646) that links payment to performance. In implementing the Hospital IQR Program and other quality reporting programs, we have 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 the Hospital IQR Program with various other programs, including those authorized by the Health Information Technology for Economic and Clinical Health (HITECH) Act so that the burden for reporting will be reduced. We also are implementing a Hospital Value-Based Purchasing (VBP) Program under section 1886(o) of the Act. Earlier this year, we issued a final rule (76 FR 26490 through 26547) (the Hospital Inpatient VBP Program final rule) that implemented the Hospital VBP Program. We proposed additional policies for the Hospital VBP Program in section IV.B. of the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25926 through 25928) and in section XVI. of the CY 2012 OPPS/ASC proposed rule (76 FR 42354 through 42365). In the Hospital Inpatient VBP Program proposed rule (76 FR 2454 through 2491), we proposed that hospitals would receive valuebased incentive payments if they meet performance standards with respect to measures for a performance period for the fiscal year involved. The measures under the Hospital VBP Program must be selected from the measures specified under the Hospital IQR Program. The Hospital VBP Program will apply to payments for discharges occurring on or after October 1, 2012, in accordance with section 1886(o) of the Act. The Hospital IQR Program is intertwined with the Hospital VBP Program because the measures and reporting infrastructure for both programs will overlap. We view the Hospital VBP Program as the next step in promoting higher quality care for Medicare beneficiaries by transforming Medicare into an active purchaser of quality health care for its beneficiaries. As we stated in the Hospital Inpatient VBP Program proposed rule (76 FR PO 00000 Frm 00131 Fmt 4701 Sfmt 4700 51605 2455), in developing that proposed rule as well as other value-based payment initiatives, we applied the following principles for the development and use of measures and scoring methodologies: Purpose: • We view value-based purchasing as an important step to revamping how care and services are paid for, moving increasingly toward rewarding better value, outcomes, and innovations instead of merely volume. Use of Measures: • Public reporting and value-based payment systems should rely on a mix of standards, process, outcomes, and patient experience of care measures, including measures of care transitions and changes in patient functional status. Across all programs, we seek to move as quickly as possible to the use of primarily outcome and patient experience measures. To the extent practicable and appropriate, outcome and patient experience measures should be adjusted for risk or other appropriate patient population or provider characteristics. • To the extent possible and recognizing differences in payment system maturity and statutory authorities, measures should be aligned across public reporting and payment systems under Medicare and Medicaid. The measure sets should evolve so that they include a focused core set of measures appropriate to the specific provider category that reflects the level of care and the most important areas of service and measures for that provider. • The collection of information should minimize the burden on providers to the extent possible. As part of that effort, we will continuously seek to align our measures with the adoption of meaningful use standards for health information technology (HIT), so the collection of performance information is part of care delivery. • To the extent practicable, measures used by CMS should be nationally endorsed by a multi-stakeholder organization. Measures should be aligned with best practices among other payers and the needs of the end users of the measures. We invited public comment on these principles. Comment: Many commenters supported CMS’ measure selection principles for the Hospital IQR Program and the Hospital VBP Program. The commenters believed that these principles reflect the efficacy of quality measure reporting, reduce data collection burdens and facilitate alignment of measures across Medicare programs. Furthermore, the commenters applauded CMS’ overarching goal of E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51606 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations improving the quality and costeffectiveness of care provided in health care institutions. Response: We appreciate the commenters’ support. We will continue implementing these principles to reach our goal to foster quality improvement, establish strong and effective quality standards, and systematically link quality to payment in various healthcare settings. Comment: Many commenters overwhelmingly supported our efforts to enhance healthcare quality transparency through the public reporting of quality measures. Response: We appreciate the commenters’ support of public reporting of quality measures. Comment: Many commenters stated that with the increasing number of measures across the Medicare and Medicaid programs, CMS should align the measures adopted for various Medicare programs whenever possible to reduce the hospital reporting burden. One commenter further suggested that future measure reporting alignment across payers would reduce the burden of quality reporting and also allow for the meaningful comparison of healthcare quality. Response: We recognize that the addition of manually chart-abstracted measures to the Hospital IQR Program over time has increased the reporting burden on hospitals. Aligning and harmonizing measures across Medicare programs and implementing electronic measure reporting are high priority goals for us, and we seek to further these goals as we select measures for our programs. We agree with the commenters regarding the importance of measure alignment across our programs in order to provide meaningful comparative information for beneficiaries, and we have sought to collect and utilize all-patient data for the measures used in our programs wherever possible. Currently, we collect all-patient data for all of the chartabstracted and survey-based measures for the Hospital IQR, and Hospital OQR Programs. We also agree that alignment of measure reporting requirments across payers would also reduce burden among providers responding to multiple reporting requirements. CMS has adopted many measures that are in widespread use in the industry and by other payers, and will continue to do so when feasible and practicable. Comment: One commenter encouraged CMS to articulate the relationship between the measures selected for the Hospital IQR Program and the framework laid out in the National Quality Strategy. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Response: In March 2011, HHS issued a Report to Congress entitled ‘‘National Strategy for Quality Improvement in Health Care [National Quality Strategy].’’ The National Quality Strategy was developed with input from stakeholders across the health care system, including Federal and State agencies, local communities, provider organizations, clinicians, patients, businesses, employers, and payers. The National Quality Strategy is located at: https://www.healthcare.gov/center/ reports/nationalqualitystrategy032011. pdf. The purpose of the National Quality Strategy is to provide a strategic plan for improving health care, of which measurement is an integral component. The National Quality Strategy promotes three overarching aims—Better Care (improving overall quality by making health care more patient-centered reliable, accessible and safe), Healthy People/Healthy Communities (improving the health of the U.S. population by supporting proven interventions to address behavioral, social and, environmental determinants of health in addition to delivering higher-quality care), and Affordable Care (reducing the cost of quality health care for individuals, families, employers, and government). The NQS also lists six priorities to target in furthering these goals: (1) Making care safer by reducing harm caused in the delivery of care; (2) ensuring that each person and family are engaged as a partner in their care; (3) promoting effective communication and coordination of care; (4) promoting the most effective prevention and treatment practices for the leading causes of mortality, starting with cardiovascular disease; (5) working with communities to promote wide use of best practices to enable healthy living; and (6) making quality care more affordable for individuals, families, employers, and governments by developing and spreading new health care delivery models. Our measure selection activity for the Hospital IQR Program directly addresses the first five of these six priorities. For example, the selection of Hospital Acquired Condition (HAC) measures, Healthcare-Associated Infection (HAI) measures, and AHRQ Patient Safety Indicators (PSIs) and Inpatient Quality Indicators (IQIs) addresses the first priority of safer healthcare, and reduction of harm. The selection of the HCAHPS survey addresses the second priority of patient/family engagement. The risk-adjusted 30-day readmission and 30-day mortality measures address effective coordination of care. The PO 00000 Frm 00132 Fmt 4701 Sfmt 4700 current process of care measures for AMI, HF, PN, and Surgical Care address effective prevention and treatment practices. Lastly, the structural measures adopted for the Hospital IQR Program address encouragement of best practices. To the extent that the measures we have adopted for Hospital IQR are used in CMS value-based purchasing programs, alternative payment demonstrations, and the evaluation of new delivery system models, the measures also address the sixth priority area of the National Quality Strategy. Comment: One commenter expressed concern about the overlap in the use of the same HACs in the Hospital IQR and Hospital VBP Programs. The commenter suggested that CMS adopt mutually exclusive HAC measures so that hospitals are not penalized for the same HAC measures adopted for various Medicare programs. Response: We do not agree with the commenter’s view that the implementation of the same HAC measures in both the Hospital VBP and Hospital IQR Programs would penalize hospitals twice with respect to these measures. Under section 1886(o)(1)(C)(ii)(I) of the Act, a hospital that is subject to the payment reduction under the Hospital IQR Program with respect to a fiscal year is excluded from the Hospital VBP Program for that year. Also, as we stated in the Hospital Inpatient VBP Program final rule (76 FR 26504), we view the program authorized by section 3008 of the Affordable Care Act and the Hospital VBP Program as being related but separate efforts to reduce HACs. Although the Hospital VBP Program is an incentive program that provides incentive-based payments to hospitals based on quality performance, the program established by section 3008 of the Affordable Care Act creates a payment adjustment resulting in payment reductions for the lowest performing hospitals. We also view programs that could potentially affect a hospital’s Medicaid payment as separate from programs that could potentially affect a hospital’s Medicare payment, although we intend to monitor the various interactions of programs authorized by the Affordable Care Act and their overall impact on providers and suppliers. Comment: A few commenters suggested that CMS should adopt NQFendorsed measures whenever possible. A commenter further noted that if CMS adopts non-NQF-endorsed measures, these measures should be formally tested prior to their inclusion in the Hospital IQR Program. Another commenter stated that if CMS considers E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations adopting measures that are endorsed by organizations other than the NQF, CMS should ensure that such organizations demonstrate strong consensus activities from consumers, healthcare organizations, physicians and other relevant professionals, purchasers and payers, and the organizations should have demonstrated expertise in healthcare quality measurement. A commenter suggested that CMS seek expedited NQF review of non-NQFendorsed measures under consideration. Response: We thank the commenters for all their suggestions for measure endorsement. We have generally adopted NQF-endorsed measures whenever possible. For non-NQF endorsed measures developed by CMS, we use a consensus-based measure development process that includes broad stakeholder input, and as part of this development process, we test feasibility, validity, and reliability whenever feasible and practicable. 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 Hospital IQR Program for payments beginning with FY 2013. Under the amended provision of the Act, for payments beginning with FY 2013, each measure specified by the Secretary must be endorsed by a consensus entity that has a contract with the Secretary under section 1890(a) of the Act (currently the 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. We thank the commenters for suggesting that we attempt to expedite NQF review of non-NQF-endorsed measures under consideration for the Hospital IQR Program, and we will consider doing so for measures for which CMS is the steward. Comment: One commenter expressed concerns about the sufficiency of the risk-adjustment methods for the proposed process of care and outcome measures. The commenter recommended that CMS and AHRQ convene an expert panel to develop riskadjustment for the measures used in the Hospital IQR, Hospital Readmissions Reduction and Hospital VBP Programs. Commenters stated that riskadjustments should include patient VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 demographic factors (for example, age, sex, race, and socioeconomic status), severity of illness, and types of services being provided. Response: The current 30-day outcome measures and AHRQ PSIs and IQIs in the Hospital IQR Program are NQF-endorsed, and are risk adjusted using NQF-endorsed risk adjustment methodologies that include clinical risk factors. The current NQF policy for risk adjustment does not encourage risk adjustment for non-clinical patient demographic factors, because doing so may obscure disparities in care provided by hospitals to disadvantaged groups. The risk adjustment methodology employed in the NQFendorsed outcome measures adopted for the Hospital IQR Program, therefore, would follow these principles. Most of the outcome measures used in these programs are restricted to a specific condition or procedure, and therefore do not need to be adjusted for the type of service being provided as suggested by one of the commenters. Other outcome measures, such as the HACs, assess ‘‘never events’’ or serious reportable events that would not be appropriate to risk adjust for either clinical or demographic factors. CMS and AHRQ both participate in Measure Application Partnership workgroups convened by the NQF. These workgroups are tasked with issuing recommendations to HHS on various aspects of measurement (such as appropriate risk adjustment) for consideration in HHS’ programs. Comment: Some commenters urged CMS to focus heavily on outcome measures. Response: We agree with the commenters. The adoption of outcome measures has always been and will remain as a priority goal for the Hospital IQR and Hospital VBP Programs. We thank the commenters for their comments on our measure development principles, and we will consider these comments as we develop and select measures in the future. b. Statutory History and History of Measures Adopted for the Hospital IQR Program We refer readers to the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR 43860) and the FY 2011 IPPS/LTCH PPS final rule (75 FR 50180) for detailed discussions of the history of the Hospital IQR Program, including the statutory history and the measures we have adopted for the Hospital IQR measure set through FY 2014. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25891), we sought comments on an option that would PO 00000 Frm 00133 Fmt 4701 Sfmt 4700 51607 allow us from time to time to consider a range of consensus endorsement entities or bodies that can assist us with our measure development process. We believe that this approach would provide for a diverse endorsement process and the best body of evidence to support measures used in our quality programs. Comment: Several commenters recommended that CMS use the NQF as the sole consensus entity. These commenters stated that the NQF, which is composed of healthcare stakeholders, has developed a robust measurement evaluation system for the measure’s importance, scientific acceptability, feasibility and usability, and their endorsed measures are gold standards. Other commenters recommended the NQF, Hospital Quality Alliance (HQA), and Measure Application Partnership (MAP) as consensus endorsement entities for assisting CMS in the measure development process. These commenters considered these organizations as the primary consensus groups for hospital quality reporting. These commenters believed that the HQA, composed of public and private partners, can appropriately select NQFendorsed measures that best assess quality in high priority areas. These commenters also pointed out that the MAP was created under the Affordable Care Act, and aimed to recommend a coordinated set of measures for acute hospital, physician and long-term care hospital quality reporting. One commenter requested clarification as to which other entities are being considered by CMS for inclusion in its list(s) of consensus endorsement entities. Response: We thank the commenters for their suggestions. Under section 1886(b)(3)(B)(viii)(IX) of the Act, for payments beginning with FY 2013, each measure specified by the Secretary under the Hospital IQR Program must be endorsed by the entity with a contract under section 1890(a) of the Act, except in certain circumstances. This contract is currently held by the NQF, and for this reason, we generally look to the NQF for endorsement of the measures we are considering for the Hospital IQR Program. However, 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. E:\FR\FM\18AUR2.SGM 18AUR2 51608 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 We also note that we give consideration to suggestions from other organizations such as the HQA, and the newly convened MAP, as well as from public comment received through rulemaking. As stated in the proposed rule, we strive to align measures where possible and appropriate across programs. practice guidelines, and best practices. We will take this suggestion under consideration during our measure maintenance process, which informs changes to the Specification Manual. d. 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 c. Maintenance of Technical the Secretary establish procedures for Specifications for Quality Measures making information regarding measures submitted available to the public after The technical specifications for the Hospital IQR Program measures, or links ensuring that a hospital has the opportunity to review its data before to Web sites hosting technical they are made public. In the FY 2012 specifications, are contained in the IPPS/LTCH PPS proposed rule (76 FR CMS/The Joint Commission 25891 through 25892), we proposed to Specifications Manual for National display information regarding the Hospital Inpatient Quality Measures measures (such as names of measures (Specifications Manual). This for which data will be displayed in the Specifications Manual is posted on the future) on the Hospital Compare Web CMS QualityNet Web site at https:// site under this provision, and invited www.QualityNet.org. We maintain the technical specifications by updating this public comment on this proposal. We Specifications Manual semiannually, or will continue our current practice of reporting data from the Hospital IQR more frequently in unusual cases, and Program as soon as it is feasible on CMS include detailed instructions and Web sites such as the Hospital Compare calculation algorithms for hospitals to use when collecting and submitting data Web site, https:// www.hospitalcompare.hhs.gov, after a on required measures. These semiannual updates are accompanied by 30-day preview period. The Hospital Compare Web site is an notifications to users, providing interactive Web tool that assists sufficient time between the change and the effective date in order to allow users beneficiaries by providing information on hospital quality of care to those who to incorporate changes and updates to need to select a hospital. It further the specifications into data collection serves to encourage beneficiaries to systems. work with their doctors and hospitals to The technical specifications for the discuss the quality of care hospitals HCAHPS patient experience of care provide to patients, thereby providing survey are contained in the current HCAHPS Quality Assurance Guidelines an additional incentive to hospitals to improve the quality of care that they manual, which is available at the furnish. The Hospital IQR Program HCAHPS On-Line Web site, https:// www.hcahpsonline.org. We maintain the currently includes process of care measures, risk-adjusted outcome HCAHPS technical specifications by measures, the HCAHPS patient updating the HCAHPS Quality Assurance Guidelines manual annually, experience-of-care survey, and structural measures, all of which are and include detailed instructions on survey implementation, data collection, featured on the Hospital Compare Web site. data submission and other relevant However, information that may not be topics. As necessary, HCAHPS Bulletins relevant to or easily understood by are issued to provide notice of changes beneficiaries and information for which and updates to technical specifications there are unresolved display issues or in HCAHPS data collection systems. design considerations for inclusion on Comment: One commenter requested Hospital Compare may be made that CMS exercise its administrative authority to add the new FDA-approved available on other CMS Web sites that are not intended to be used as an Fidaxomicin off-cycle via Release Note interactive Web tool, such as https:// to the current Specification Manual for www.cms.hhs.gov/HospitalQualityInits/. National Hospital Inpatient Quality Publicly reporting the information in Measures (3.3a), Medication List— this manner, though not on the Hospital Appendix C—Table 2.1 ‘‘Antimicrobial Medications—for hospital discharges as Compare Web site, allows CMS to meet the requirement under section of April 1, 2011.’’ 1886(b)(3)(B)(viii)(VII) of the Act for Response: We convene Technical establishing procedures to make Expert Panels (TEPs) for measure information regarding measures development and maintenance in order submitted under the Hospital IQR to ensure that our measures reflect current science, evidence-based clinical Program available to the public VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00134 Fmt 4701 Sfmt 4700 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: Many commenters overwhelmingly supported the increasing transparency in public reporting and appreciated CMS’s principles for selecting measures. The commenters believed that these principles reflect practical aspects of quality data reporting such as reducing the burden of data collection on providers as well as aligning measures across programs. The commenters stated that CMS should ensure that this performance measure information is meaningful in improving patient care outcomes. Some commenters stated that more consumer education on performance measure data displayed on Hospital Compare is needed for meaningful interpretation of the data and identification of opportunities to improve patient outcomes. Response: We greatly appreciate the commenters’ support of public quality reporting and agree that consumer education is an ongoing process. We continuously strive to improve the userfriendliness of Hospital Compare Web site design and educate Medicare beneficiaries in understanding healthcare quality and healthcare trends. For example, we conduct periodic consumer testing to find out consumer preference for measure domains, understanding of measures and associated explanatory text. We believe that the reporting of various hospital quality metrics incentivizes hospitals to assess their patient care performance and identify opportunities to improve patient outcomes. In addition, the healthcare information released on Hospital Compare has become a popular resource for beneficiaries when they need to make decisions regarding their healthcare. Comment: A few commenters opposed our intention to display measure names for which data will be displayed in the future on the Hospital Compare Web site. The commenters believed that the display of more descriptive information on future measures would help consumers better understand what the future measures are. The commenters believed that displaying only the measure names would not be helpful to consumers who need to choose a hospital for medical care. Response: We use the Hospital Compare ‘‘spotlight’’ section to E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations highlight upcoming changes to the site, including the addition of new measures, topics, and future potential Hospital VBP Program measures. The measure names alone are not intended to drive consumer choice regarding which hospital to select, but we believe that highlighting names of measures to be added to Hospital Compare introduces possible new topic areas that consumers can discuss with their physicians in choosing a hospital. We also provide information about why the new measure topic may be important to know about. Comment: Some commenters stated that data display on Hospital Compare should cater to consumers who visit Hospital Compare for information related to short-term healthcare decisions. Response: We interpret the commenters’ statements to mean that the information displayed on the Hospital Compare should provide information to help consumers to make informed decisions regarding inpatient acute care services (for example, treatments, tests, procedures or surgeries) that may be provided by a hospital. Hospital Compare is designed to be a consumer-oriented Web site where consumers can obtain information on how well hospitals provide care to their patients. The Web site displays quality data on process of care and outcome measures for heart attack, heart failure, pneumonia and surgical care as measured by the Surgical Care Improvement Project (SCIP). In the future, we will display data on other topics, such as HospitalAssociated Infections (HAIs) and complications of care. We will continue to post data to the Web site in a manner that is easy for consumers of the data to understand. Comment: A few commenters opposed CMS’ current practice of publishing performance measure information on Web sites other than Hospital Compare for information that may not be relevant to or easily understood by beneficiaries and information for which there are unresolved display issues or design considerations for inclusion on Hospital Compare. The commenters were concerned that it would be difficult for providers and consumers to navigate and track information on multiple sites and supported Hospital Compare as the sole source for public display of quality reporting. The commenters recommended Hospital Compare be the sole Web site for display of quality data and supported continued improvement in the Hospital Compare Web site to make its data comprehensive and meaningful to consumers. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Response: We believe that Hospital Compare should be the primary vehicle for displaying hospital quality data reported for the Hospital IQR Program. As we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), the data we display on Web sites other than Hospital Compare is displayed on a temporary basis because of pending display design and other unresolved issues so as to not confuse beneficiaries who intend to use data in making healthcare decisions. Once an appropriate display mechanism has been determined, the information is added to the Hospital Compare Web site. Comment: One commenter noted that results displayed on Hospital Compare should always exclude results based on a small number of cases or those results that may be misinterpreted by consumers. Response: Currently, hospital-level process of care measures based on fewer than 25 cases are displayed with a footnote indicating that the number of cases may be too few for meaningful comparisons to be made. Hospital-level risk-adjusted outcome measure rates based on fewer than 25 cases are not displayed at all. This minimum case threshold may be subject to change in the future to match the minimum case threshold for the various measures established for the Hospital VBP Program. We thank the commenter for this suggestion. Comment: One commenter suggested the standalone display of the PSI–12 Post-operative PE and DVT measure due to its significance as an indicator of hospital quality for Medicare beneficiaries undergoing surgeries that may put them at risk for thromboembolism. Response: We appreciate this comment. We have not finalized the display options for the AHRQ PSI and IQI composite measures, in which PSI– 12 is included. We will take this suggestion into consideration for the display of the AHRQ measures. Comment: One commenter suggested that public reporting should be presented in different formats to meet the needs of consumers, healthcare providers and researchers. Response: We are exploring options as to how best meet the needs of our multiple stakeholders, including beneficiaries and researchers. A new Web site, https:// www.data.medicare.gov, allows researchers and other interested parties to view and manipulate multiple data sources, including downloadable databases from hospitals, nursing homes and dialysis facilities. PO 00000 Frm 00135 Fmt 4701 Sfmt 4700 51609 Comment: One commenter asked whether the data displayed on Hospital Compare included data from Medicare Advantage affiliated hospitals. Response: Section 1886(b)(3)(B)(viii)(VII) of the Act requires that the Secretary establish procedures for making information regarding measures submitted under the Hospital IQR Program available to the public. The Hospital IQR Program applies to subsection (d) hospitals, many of which treat beneficiaries enrolled in Medicare Advantage (MA) plans. With respect to the process of care measures, the data are collected, and subsequently displayed, on all patients, including these MA beneficiaries. However, the claimsbased measures are currently calculated using only Medicare Part A fee for service claims and do not, for that reason, capture MA beneficiary data. In the future, we hope to collect outcome measure data on all patients. After consideration of the public comments we received, we are finalizing our proposal to display information regarding the measures (such as names of measures for which data will be displayed in the future) on the Hospital Compare Web site. 2. Retirement of Hospital IQR Program Measures a. Considerations in Retiring Quality Measures From the Hospital IQR Program We generally retain measures from the previous year’s Hospital IQR Program measure set for subsequent years’ measure sets. We previously retired one ‘‘topped out’’ measure, PN–1: Oxygenation Assessment for Pneumonia, from the Hospital IQR Program on the basis of high unvarying performance among hospitals, because 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 Hospital IQR Program because it no longer ‘‘represent[ed] the best clinical practice,’’ as required under section 1886(b)(3)(B)(viii)(VI) of the Act. 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, it is appropriate for CMS to take immediate action to remove a measure from the Hospital IQR Program and not wait for the annual rulemaking cycle. Therefore, we adopted the policy (74 FR 43864 and 43865) that we would promptly retire such a measure, confirm E:\FR\FM\18AUR2.SGM 18AUR2 51610 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 the retirement in the next IPPS rulemaking cycle, and notify hospitals and the public of the decision to promptly retire measures through the usual hospital and QIO communication channels used for the Hospital IQR Program. These channels include memos, e-mail notification, and QualityNet Web site postings. As we stated in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50185), among the criteria that we consider when determining whether to retire Hospital IQR Program measures are the following: (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) 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 or public reporting of a measure leads to negative unintended consequences other than patient harm. These criteria were suggested by commenters during rulemaking, and we agreed that these criteria should be among those considered in evaluating Hospital IQR Program measures for retirement. b. Retirement of Hospital IQR Program Measures for the FY 2014 Payment Determination and Subsequent Years In order to reduce the reporting burden on hospitals, and in particular, the burden associated with reporting chart-abstracted measures, we have considered options to accommodate the expansion of the measure set through the retirement of additional Hospital IQR measures. Specifically, we have considered retiring one or more of the 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 commenters recommended for retirement 11 Hospital IQR Program chart-abstracted measures. Seven of these 11 measures were recommended by commenters for retirement based on their performance being uniformly high nationwide, with little variability among hospitals (topped-out measures). Based on our own analysis, we concluded that these measures are topped out and for this reason, we proposed not to include VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 them in the FY 2013 Hospital VBP Program measure set (76 FR 2460). These measures are listed below: • 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 INF–6 Appropriate Hair Removal The methodology we used to determine that these measures are topped out is detailed in the Hospital VBP Program proposed rule (76 FR 2460). In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25892), we proposed to retire these topped out measures from the Hospital IQR measure set. In addition, we proposed to not include an eighth measure in the FY 2013 Hospital VBP Program measure set because we believe that inclusion of this measure would result in the unintended consequence of inappropriate antibiotic use (76 FR 2462). This measure is PN– 5c Timing of receipt of initial antibiotic following hospital arrival. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25892), we also proposed to retire this measure from the Hospital IQR Program because of the potential for this negative unintended consequence. For these reasons, we proposed to retire these eight measures from the Hospital IQR measure set for FY 2014 and subsequent years, and that hospitals would no longer be required to submit data on these measures starting with January 1, 2012 discharges. We invited public comment on this proposal. Comment: Several commenters supported the CMS measure retirement criteria and the proposed retirement of the 8 proposed topped out measures to reduce burden. The commenters encouraged CMS to replace process measures with comparable outcome measures whenever possible. Response: We thank the commenters for their support and agree with the suggestion that, when possible, process measures should be replaced by suitable outcome measures. Comment: A few commenters suggested that CMS should proceed cautiously in its decisions whether to retire topped-out measures or measures no long supported by scientific evidence. Some commenters recommended the continuation of data collection for topped out measures because they were concerned that there PO 00000 Frm 00136 Fmt 4701 Sfmt 4700 may be unintended consequences, such as a deterioration of the standard of care, if data collection and monitoring are discontinued. Response: We believe it is appropriate to retire measures based on our measure retirement criteria. Retirement using these criteria also meets our goals of minimizing the reporting burden, and staying current with the latest scientific evidence. Furthermore, we believe that in many cases, the proposed topped out measures have been integrated into standard hospital clinical practices and for this reason, we believe it is unlikely that the types of beneficiary care addressed by these measures would deteriorate as a result of their retirement from the Hospital IQR Program measure set. However, as explained below, we have decided not to retire four of the eight measures we proposed to retire. Instead, we will retain these measures in the Hospital IQR Program but suspend data collection on them. We believe this will address the commenters’ concern that we proceed cautiously when deciding whether to retire measures. Comment: A few commenters opposed the retirement of the quality measures that have been deemed clinically meaningful or that were part of long-standing measure sets. A commenter suggested that CMS consider including topped out measures in composite measures. Commenters were concerned that the retirement of these measures may disrupt quality improvement efforts in hospitals. A commenter noted that quality measurement in general has the optimal impact on quality of care and patient outcomes when multiple related metrics are used. Another commenter believed that topped out measures that are NQFendorsed should stay in the Hospital IQR Program until the NQF has retired them. Response: While we are dedicated to the care and safety of our beneficiaries, we are also concerned with the burden placed on hospitals in order to collect data for the Hospital IQR Program. We do not believe we should continue collecting measures simply because they are part of a long standing measure set or that it would be generally meaningful to combine topped out measures into a composite topped out measure. Our decision to retire a measure from the Hospital IQR Program would not preclude a hospital from continuing to improve its own performance on the measure. Moreover, as discussed below, we are keeping four of the measures we proposed for retirement in the Hospital IQR Program, but are suspending the data submission requirements for these E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations measures. This approach will reduce data collection burdens on hospitals, but will enable us to resume data collection should we observe abrupt declines in adherence to these measures. Comment: A few commenters supported the retirement of AMI–4, HF– 4, and PN–4 because they are topped out. A few commenters stated that these 3 measures and the PN–5c measure do not meet the The Joint Commission accountability measure criteria and should be retired. Another commenter requested clarification on the reason for retiring PN–5c since this measure has been a high priority in hospitals which have geared up training efforts for this measure. Response: We thank the commenters for supporting our proposal to retire these four measures, and we are finalizing our proposal to retire these measures beginning with January 1, 2012 discharges. The three adult smoking cessation counseling measures (AMI–4, HF–4, and PN–4) are no longer NQF-endorsed. They are also topped out, which provides us with some assurance that these processes have been incorporated into routine hospital care. With respect to the PN–5c measure, we believe that the continued collection of this measure might lead to the unintended consequence of antibiotic overuse, which is a practice that could negatively affect beneficiary health and one that should not be incentivized through the Hospital IQR Program. Should we decide in the future that the clinical evidence supports the re-adoption of one or more of these measures into the Hospital IQR Program measure set, we will propose to re-adopt the measure(s) in rulemaking. Comment: One commenter suggested that CMS establish policies to retire a quality measure midyear if the measure is found to have unintended serious consequences. Response: We appreciate this suggestion. Our current policy is to immediately suspend collection of a measure when there is reason to believe that continued collection of the measure raises patient safety concerns. In these circumstances, we will take action outside of the rulemaking cycle, and then confirm the retirement in the next IPPS rulemaking cycle. We will also disseminate this information to hospitals and the public through the usual hospital and QIO communication channels used for the Hospital IQR Program, including the QualityNet Web site, e-mail blasts, memos and other information postings as needed. Comment: One commenter recommended that the following four VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 measures also be considered for retirement: HF–1 (because it is a ‘‘check the box’’ measure and is not related to the quality of the discharge process), SCIP–Inf–2 (because it is a process measure which can be replaced by its outcome measure which is the Surgical Site Infection measure scheduled for implementation for FY 2014), SCIP– INF–VTE–1 and SCIP–VTE–2 (because these 2 proposed VTE measures are already included in the VTE measure set for FY 2015) and PN–3b (because of the incompatible EHR integration with the clinical workflow). Response: We thank the commenter for these recommendations and will evaluate them in our measure review for future rulemaking. Comment: Many commenters agreed that the retirement of all eight measures would result in a reduction in chart abstraction burden for hospitals. However, a few commenters were particularly concerned about retiring AMI–1, AMI–3, AMI–5, and SCIP Infection–6 because they have been designated as accountability measures by The Joint Commission.5 The commenters agreed that these measures should not be used in the Hospital VBP Program but urged CMS to keep these measures in the Hospital IQR Program and continue their display on Hospital Compare in order to prevent a decline in adherence to the important care processes assessed by these measures that are clinically associated with better outcomes. Commenters supported the cessation of data collection for these measures that we proposed for retirement (AMI–1, AMI–3, AMI–5, and SCIP INF–6) in order to ease the data collection burden. Response: We have been persuaded by these commenters that it might be premature to retire these measures (AMI–1, AMI–3, AMI–5 and SCIP INF– 6) from the Hospital IQR Program. As the commenters pointed out, these measures, unlike the other four measures we proposed to retire, have been defined by The Joint Commission as measures of accountability. In addition, these measures, unlike three of the other four measures, are currently still endorsed by the NQF. We are sensitive, however, to comments noting how the continued adoption of chart-abstraction measures over time has increased the burden to hospitals. Therefore, in an effort to balance our goal to incentivize high 5 Accountability measures are defined by the Joint Commission as measures that: (1) Support a strong link between the measure and improved outcomes; (2) accurately assess the relevant clinical process; and (3) have minimal unintended adverse consequences if implemented. PO 00000 Frm 00137 Fmt 4701 Sfmt 4700 51611 quality care with the goal to work where possible to minimize the data collection burden for hospitals, we have decided to retain these measures in the Hospital IQR Program but to suspend data collection on them until such time that the evidence shows that hospital adherence to these practices has unacceptably declined. In these circumstances, we would resume data collection using the same form and manner and on the same quarterly schedule that we finalized for these and other chart abstracted measures for the applicable period of collection, providing at least 3 months of notice prior to resuming data collection. Hospitals would be notified of this via CMS listservs, CMS e-mail blasts, national provider calls, and QualityNet announcements. In addition, we would comply with any requirements imposed by the Paperwork Reduction Act before resuming data collection of these 4 measures. In summary, based upon the public comments we received, we are retiring the following four measures beginning with January 1, 2012 discharges: • AMI–4 Adult smoking cessation advice/counseling • HF–4 Adult smoking cessation advice/counseling • PN–4 Adult smoking cessation advice/counseling • PN–5c Timing of receipt of initial antibiotic following hospital arrival We are suspending data collection for the following four measures beginning with January 1, 2012 discharges: • AMI–1 Aspirin at arrival • AMI–3 ACEI/ARB for left ventricular systolic dysfunction • AMI–5 Beta-blocker prescribed at discharge • SCIP INF–6 Appropriate Hair Removal 3. Measures for the FY 2014 and FY 2015 Hospital IQR Payment Determinations a. Considerations in Expanding and Updating Quality Measures Under the Hospital IQR Program In general, we seek to adopt measures for the Hospital IQR Program that promote better, safer, more efficient care. Our measure development and selection activities for the Hospital IQR Program take into account national priorities, such as those established by the National Priorities Partnership, HHS Strategic Plan, the National Strategy for Quality Improvement in Healthcare, as well as other widely accepted criteria established in medical literature. (We refer readers to the following Web sites regarding these priorities: https:// E:\FR\FM\18AUR2.SGM 18AUR2 51612 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 www.nationalprioritiespartnership.org/ (National Priorities Partnership); https:// www.hhs.gov/secretary/about/priorities/ priorities.html (HHS Strategic Plan); and https://www.healthcare.gov/center/ reports/quality03212011a.html (National Strategy for Quality Improvement in Healthcare)). To the extent practicable, we have sought to adopt measures which have been endorsed by a national consensus organization, recommended by multistakeholder organizations, and developed with the input of providers, purchasers/payers and other stakeholders. Because measures for the Hospital VBP Program must be selected from the measures specified for the Hospital IQR Program, the measures to be selected for inclusion in the Hospital VBP Program also reflect these priorities. In addition, we believe it is important to expand the pool of measures to include measures that are directed toward improving patient safety. This goal is supported by at least two Federal reports documenting that tens of thousands of patients do not receive safe care in the nation’s hospitals.6 7 Section 3001(a)(2) of the Affordable Care Act amended the Act by adding a new section 1886(b)(3)(B)(viii)(VIII) of the Act. This section states that, ‘‘[e]ffective for payments beginning with fiscal year 2013, with respect to quality measures for outcomes of care, the Secretary shall 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.’’ Section 3001(a)(2) of the Affordable Care Act also added new sections 1886(b)(3)(B)(viii)(IX)(aa) and (bb) of the Act. These sections state that ‘‘* * * effective for payments beginning with fiscal year 2013, each measure specified by the Secretary under this clause shall be endorsed by the entity with a contract under section 1890(a) [of the Act],’’ and ‘‘[i]n the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical has not been endorsed by the entity with a contract under section 1890(a) [of the Act], the 6 OEI–06–09–00090, ‘‘Adverse Events in Hospitals: National Incidence Among Medicare Beneficiaries.’’ Department of Health and Human Services, Office of Inspector General, November 2010. 7 2009 National Healthcare Quality Report, pp. 107–122. ‘‘Patient Safety,’’ Agency for Healthcare Research and Quality. 8 McKibben L, Horan T, Guidance on public reporting of healthcare-associated infections: Recommendations of the Healthcare Infection Control Practices Advisory Committee. AJIC 2005; 33:217–26 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ In the FY 2011 IPPS/LTCH PPS final rule, we established that all of the measures adopted in that rule for the FY 2013 and FY 2014 payment determinations meet these standards (75 FR 50200). We have previously acknowledged the data collection burden for hospitals participating in the Hospital IQR Program, and reiterated our desire to expand the Hospital IQR Program measure set while minimizing burden and seeking to provide alternative mechanisms for data submission (75 FR 50189). We also stated that in future expansions and updates to the Hospital IQR Program measure set, we would be taking into consideration several important goals. These goals include: (a) Expanding the types of measures beyond process of care measures to include an increased number of outcome measures, efficiency measures, and patients’ experience of care measures; (b) expanding the scope of hospital services to which the measures apply; (c) considering the burden on hospitals in collecting chart-abstracted data; (d) harmonizing the measures used in the Hospital IQR Program with other CMS quality programs to align incentives and promote coordinated efforts to improve quality; (e) seeking to use measures based on alternative sources of data that do not require chart abstraction or that utilize data already being reported by many hospitals, such as data that hospitals report to clinical data registries, or all-payer claims databases; and, (f) weighing the relevance and utility of the measures compared to the burden on hospitals in submitting data under the Hospital IQR Program. Specifically, we give priority to 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 Hospital IQR Program measure set. In addition, in selecting measures, we seek to address the six quality aims of effective, safe, timely, efficient, patient-centered, and equitable healthcare. Current and long term priority topics include: prevention and population health; safety; chronic PO 00000 Frm 00138 Fmt 4701 Sfmt 4700 conditions; high cost and high volume conditions; elimination of health disparities; HAIs 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 HIT. Hospital IQR 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 measures and claims-based measures that we can calculate using other data sources. This approach supports our goal of expanding the measures for the Hospital IQR Program while minimizing the burden on hospitals and, in particular, without significantly increasing the chart abstraction burden. In addition to structural measures and claims-based measures, we previously noted that registries are potential alternative sources of hospital data for the Hospital IQR Program. (A registry is a collection of clinical data for purposes of assessing clinical performance, quality of care, and opportunities for quality improvement.) We envisioned that instead of requiring hospitals to submit the same data to CMS that many hospitals are already submitting to registries, we would collect the data directly from the registries. This could enable the expansion of the Hospital IQR Program measure set without increasing the burden of data collection for those hospitals participating in the registries. We have previously adopted structural measures of registry participation, and we continue to evaluate the feasibility of leveraging registry-based data collection mechanisms for the Hospital IQR Program. We also stated our intention to explore mechanisms for data submission using electronic health records (EHRs) (73 FR 48614; 74 FR 43866, 43892; and 75 FR 50189). 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 capturing, formatting, and transmitting the 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 Hospital IQR Program measure set with less cost and burden E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations to hospitals. We believe that automatic collection and reporting of data through EHRs will greatly simplify and streamline reporting for various CMS quality reporting programs and that at a future date, currently targeted to be FY 2015, hospitals will be able to switch solely to EHR-based reporting of data that are currently manually chartabstracted and submitted to CMS for the Hospital IQR Program. We reiterate our commitment to pursue our goals to expand and update quality measures under the Hospital IQR Program and also to minimize burden. We note that in addition to the input we described above, we take into consideration the measures adopted by the Hospital Quality Alliance (HQA) as well as an array of input from the public. The HQA is a national publicprivate 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. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50191 through 502192), we finalized our proposal to adopt measures for the Hospital IQR Program for three consecutive payment determinations. The intent of this policy was to provide greater certainty for hospitals to plan to meet future reporting requirements and implement related quality improvement efforts. In addition to giving hospitals more advance notice in planning quality reporting, this 3-year approach also provides more time for us to prepare, organize and implement the infrastructure needed to collect data on the measures and make payment determinations. We indicated, however, that these preliminary measure sets could still be updated through the rulemaking process should we need to respond to agency and/or legislative changes. Finally, in section IV.A.5.a.(2) of the FY 2011 IPPS/LTCH PPS final rule (75 FR 50219 through 50220), we adopted a proposal to make Hospital IQR Program payment determinations beginning with FY 2013 using one calendar year of data for chart-abstracted measures. We will use this approach, which synchronizes the quarters for which data on these measures must be submitted during each year with the quarters used to make payment determinations with respect to a fiscal year beginning with January 1, 2011 discharges. However, it VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 will not affect our payment determinations until FY 2013. Section 1886(o)(2)(A) of the Act requires the Secretary to select measures, other than readmission measures, for the Hospital VBP Program from the measures specified under the Hospital IQR Program. Section 1886(o)(2)(B)(i)(I) of the Act states that, for FY 2013, the selected measures must cover at least the following five specified conditions or procedures: Acute myocardial infarction (AMI), Heart failure (HF), Pneumonia (PN), Surgeries, as measured by the Surgical Care Improvement Project (SCIP), and HAIs, as measured by the prevention metrics and targets established in the HHS Action Plan to Prevent HealthcareAssociated Infections [HAIs] (or any successor HHS plan). Section 1886(o)(2)(B)(i)(II) of the Act provides that, for FY 2013, measures selected for the Hospital VBP Program must also be related to the Hospital Consumer Assessment of Healthcare Providers and Systems survey (HCAHPS). In selecting measures for the Hospital IQR Program, we are mindful of the conceptual framework of the Hospital VBP Program. We will focus on selecting measures that we believe will also meet the Hospital VBP Program measure inclusion criteria and advance the goals of the Hospital VBP Program by targeting hospitals’ ability to improve patient care and patient outcomes. In addition, in order to support HHS priorities such as patient safety, reduction of HAIs, and readmissions, and to meet more of the widespread goals of the Affordable Care Act in terms of improving the quality of care provided to Medicare beneficiaries, in the FY 2012 IPPS/LTCH PPS proposed rule we proposed to adopt measures for the FY 2014 and FY 2015 Hospital IQR payment determinations. However, we noted that the final measure sets to be used for these years’ payment determinations could be changed via future rulemaking. This allows us the flexibility to accommodate changes in program needs and legislative changes. We invited public comment on these proposals. Comment: Some commenters were pleased to see CMS’s move to align measures used for various Medicare programs in order to reduce the reporting burden. Some commenters supported the alignment of all new measures with the objectives of the National Priorities Partnership, the HHS Strategic Plan, and the National Strategy for Quality Improvement in Healthcare, while other commenters recommended aligning reporting approaches across payers to reduce the burden of quality PO 00000 Frm 00139 Fmt 4701 Sfmt 4700 51613 reporting and to also allow for meaningful comparisons across payers. Response: We appreciate the commenters’ support of our ongoing alignment strategy. We may consider an approach to align measures across payers in the future. Comment: Many commenters strongly opposed the adoption of additional chart-abstracted measures because they believed these measures would increase hospital burden. One commenter urged CMS to limit its adoption of new chartabstracted measures to a maximum of three per payment determination. Some commenters recommended that CMS either: stop adopting additional new chart-abstracted measures altogether; propose to adopt new chart-abstracted measures only if it simultaneously proposes to retire the same number of measures; or retire chart-abstracted measures when related outcome measures could instead be used. A commenter suggested that CMS should monitor whether the adoption of new measures for the Hospital IQR Program would create redundancy in terms of what data is being collected. This commenter cited the following measures and measure topics included in the table of measures and topics under consideration for future implementation (76 FR 25899 through 25901) which was included the FY 2012 IPPS/LTCH PPS proposed rule as examples of potentially duplicative measures: Timing of Antibiotic Prophylaxis; Selection of Antibiotic Prophylaxis; Pre-Operative Beta Blockade; and Duration of Prophylaxis. A few commenters cited several other examples of measures that they believed are already duplicative. Specifically, these commenters believed that the 30day mortality rate and 30-day readmission rate measures for AMI, HF, and PN were duplicative of the 9 chartabstracted process measures currently included in the Hospital IQR measure set for these 3 conditions, and that for this reason, the chart-abstracted measures could be retired. Commenters further noted that the periodic evaluation of measures for redundancy would significantly reduce the administrative burden for hospitals while maintaining incentive for hospitals to focus on their quality improvement efforts. Commenters also suggested that the HAC measure (Vascular CatheterAssociated Infections) is so similar to the CLABSI measure that it is redundant for CMS to include both of these measures in the Hospital IQR Program measure set. These commenters believed that it is unnecessary and potentially confusing and inefficient to E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51614 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations collect data on these two measures simultaneously. Response: We agree that chartabstracted measures are burdensome for hospitals to collect. As soon as we can obtain quality data from EHRs, we intend to limit the adoption of chartabstracted measures for future payment determinations. To ease the burden before then, we are finalizing our proposal to retire four chart-abstracted measures beginning with January 1, 2012 discharges. Additionally, we are finalizing a policy in this final rule under which the collection of data on four chart-abstracted measures will be suspended until such time that the clinical evidence indicates that hospital adherence to these practices has unacceptably declined. We also continuously seek to harmonize and align measure specifications where applicable in an effort to reduce the incidence of duplicative measures both within and across programs. We also seek to reduce redundancy in measurement. We will carefully consider whether the measures cited by commenters significantly overlap with each other and, for that reason, whether some of the measures cited should be retired. Comment: One commenter suggested that for initial transition into EHR reporting, CMS should limit the number of electronic measures that could be collected via EHR technology. Response: We are mindful of the potential challenges that could be faced by hospitals during a transition to EHRbased reporting. We will keep these challenges in mind as we develop our proposals for adopting measures that can be reported through EHRs. Comment: In response to our projected timeframe for transitioning to EHR-based data collection, a commenter noted that given the slow progress of EHR software development, it was premature to anticipate that Hospital IQR Program measures could be collected via EHRs by 2015. Response: We believe FY 2015 is a reasonable transition date for switching from chart-abstracted measures to EHRbased reporting for the Hospital IQR Program because that is the year when certain hospitals will become subject to payment adjustments if they do not demonstrate meaningful use of certified EHR technology. For this reason, we believe that these hospitals will be EHRtechnology-ready by FY 2015. Comment: A few commenters supported using registries and the EHR reporting mechanism to ease burden and to obtain robust clinical data. Some commenters believed that registries assist hospitals in managing specific VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 patient populations more effectively. A commenter noted that reporting to a registry is not the long term solution to advance the reporting of the increasingly complex quality data, but could be an interim solution. A few commenters opposed using registries and believed that registry-based measures would create an extra burden for hospitals. These commenters explained that many registries require data collection from the medical record only, whereas other registries require the collection and submission of a significant number of data elements. Another commenter noted that registrybased reporting would not be meaningful when EHR-based reporting becomes more common in FY 2015. Response: We believe that registries, in general, hold promise for less burdensome quality reporting, and that is why we adopted several structural measures that monitor participation in systematic clinical database registries for the Hospital IQR Program. We agree that registry requirements may vary. We also agree that registries could serve as an interim solution until we implement wide-spread EHR-based reporting for the Hospital IQR Program. Comment: Some commenters encouraged CMS to consistently evaluate the relevancy and need to modify quality measures in its quality reporting expansion efforts, for small rural hospitals with limited resources. Response: We thank the commenter for this suggestion. In general, we seek to adopt measures that are broadly applicable to all hospitals, including small rural hospitals. However, we are mindful of the challenges faced by small rural hospitals with limited resources. In summary, we will continue to pursue goals regarding the expansion and updating of quality measures under the Hospital IQR Program while minimizing burden. We will take into account the public comments we received on this issue, including the possible uses of EHRs and registries in the Hospital IQR Program. We also note that in accordance with the policy we are finalizing in this final rule to suspend data collection on four measures (AMI–1, AMI–3, AMI–5, and SCIP–6), the measure set for FY 2014 and/or FY 2015 that we finalize in this final rule might change if we resume the collection of data on one or more of these measures. PO 00000 Frm 00140 Fmt 4701 Sfmt 4700 b. Hospital IQR Program Measures for the FY 2014 Hospital IQR Payment Determination (1) Retention of 56 Hospital IQR Program Measures Finalized in the FY 2011 IPPS/LTCH PPS Final Rule for the FY 2014 Payment Determination We previously finalized 60 measures for the FY 2014 Hospital IQR Program measure set. In general, we retain measures used in prior payment determinations for subsequent payment determinations unless otherwise stated. However, as we discussed above, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25892), we proposed to retire 8 measures from the FY 2014 measure set and to retain the remaining 52 of the 60 quality measures finalized in the FY 2011 IPPS/LTCH PPS final rule for the FY 2014 payment determination. We invited public comment on our proposal to retain these 52 measures for the FY 2014 payment determination. We note that in this final rule we are finalizing a policy under which we will retain four of the eight measures we proposed to retire and will retain but suspend data collection for the other four measures. Comment: One commenter was concerned about the burden of chartabstraction of two Hospital IQR measures: ED–1: Median time from emergency department arrival to time of departure from the emergency room for patients admitted to the hospital; and ED–2: Median time from admit decision to time of departure from the emergency department for emergency department patients admitted to the inpatient status. To reduce the chart-abstraction burden for these measures, the commenter suggested that patients with principal diagnosis codes unrelated to the cause for the ED visit be excluded from the denominator. Response: We share the commenter’s concern regarding the burden hospitals face to collect data on Hospital IQR measures. We acknowledge that patients seek medical attention in the hospital ED for a variety of reasons, some of which may not appear to be linked with a discharge diagnosis. We will consider whether it is appropriate to modify the ED throughput measures to exclude patients with a principal diagnosis code seemingly unrelated to the cause for the ED visit in the denominator. In such case, we will seek an NQF ad hoc review to have the new specifications endorsed. However, we believe that all patients, regardless of chief complaint or discharge diagnosis, should have access to timely and efficient care. Comment: One commenter recommended that for the Surgical Site Infection (SSI) measure that was E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations finalized in the FY 2011 IPPS/LTCH final rule for the FY 2014 payment determination, CMS should limit the surgical procedures to not more than two and increase the number of surgical procedures gradually in the future. Response: We thank the commenter for the suggestion. In the measure Specifications Manual, there are currently 395 SCIP procedures summed up into 6 stratifications: cardiac surgery, other cardiac surgery, hip arthroplasty, colon surgery, hysterectomy and vascular surgery. We are working with CDC on the collection of the Surgical Site Infection data. The data collection is consistent with the specifications, and as recommended by the CDC, we will be collecting data on 2 surgical procedure categories. This will not only reduce burden, but will allow the CDC to collect data in a phased roll out. Consistent with current NQF harmonization efforts underway for this measure, and based on recommendations by CDC, we will be collecting Surgical Site Infection data only for colon and abdominal hysterectomy procedures via NHSN for the FY 2014 payment determination. Comment: A commenter stated that current mortality and readmissions outcome measures in the Hospital IQR Program pose challenges for hospitals. Other commenters stated that the hierarchical regression model on which these measures are based includes a risk-adjustment methodology that hospitals cannot replicate or validate. These commenters believed that this hampered hospitals from generating internal reports to assess performance and that hospitals have to wait for CMS to provide the information annually. Response: Although it provides some challenges to hospitals, we believe that there are several reasons supporting our conclusion that hierarchical modeling, which is NQF-endorsed, is the appropriate statistical approach for calculating the hospital outcome measures: 30-day risk-adjusted all-cause readmission and mortality measures. This conclusion is based on the structure of the data and the underlying assumption that hospital quality of care influences 30-day mortality/readmission rates. First, patients are clustered within hospitals and, therefore, have a shared exposure to the hospital quality and processes. The use of hierarchical modeling accounts for the clustering of patients within hospitals. Second, hierarchical models distinguish withinhospital variation and between-hospital variation to estimate the hospital’s contribution to the risk of mortality or readmission. This allows for an estimation of the hospital’s influence on VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 patient outcomes. Finally, within hierarchical models we can account for both differences in case mix and sample size to fairly profile hospital performance. If we did not use hierarchical modeling we could overestimate variation and potentially misclassify hospitals’ performance. This approach to calculating the numerator, therefore, although more complex than that used for logistic regression, is more statistically accurate and fairer to hospitals. We agree that hospitals currently cannot replicate the RSMRs or RSRRs independently. Although hospitals have access to the inclusion/exclusion criteria and riskadjustment coefficients used; the model requires the input of patient longitudinal data across care settings and data from the entire national sample to estimate the hospital-specific effects used in the calculations. We will consider whether it is operationally possible to provide these data to hospitals and whether sharing these data would be consistent with patient privacy considerations. Comment: A few commenters opposed the retention of the HAC measure: Manifestations of Poor Glycemic Control and the two Global Immunization measures (Immunization for Influenza and Immunization for Pneumonia) because they believed that these measures are more appropriate to collect at the physician level. Response: We disagree with the commenters’ belief that the measures are better suited for the physician office. The HAC measure, manifestation of poor glycemic control, has ICD–9 codes that are specific to a secondary diagnosis in the hospital, not to ambulatory settings. Certain acute illnesses and procedures, such as influenza or surgery, can cause blood glucose to become uncontrolled in some patients. In these instances, a patient may react to high or low blood sugar with adverse events such as coma, or a secondary illness or infection. In response to the comments on the two Global Immunization measures, we believe that the acute care setting offers a unique opportunity to assess a patient’s immunization status and offer a service they may not otherwise receive. Comment: A commenter stated that the current AMI and HF measures adopted for the FY 2014 payment determination are not well-aligned with current evidence and treatment guidelines for AMI or HF that are reflected in the current performance measures developed by the American Heart Association/American College of Cardiology/Physician Consortium for PO 00000 Frm 00141 Fmt 4701 Sfmt 4700 51615 Performance Improvement. The commenter also stated that the HF–1 discharge instruction measure does not have a valid process outcome link. Response: We are interested in the heart failure measure set referenced by the commenter, and we included these measures in our list of measures under future consideration for this program. However, the AMI and HF measures proposed for retention in the Hospital IQR measure set were developed using the most up to date clinical evidence. The CMS TEP convened as part of our measure maintenance work for these measures includes members and guideline authors from both the American Heart Association and the American College of Cardiology. We look to TEPs to inform us of vital changes to the guidelines, assuring our measures are scientifically credible. We believe that the processes assessed by the HF–1 measure, which assesses whether discharge instructions for heart failure patients were issued, are vital in assuring that patients are appropriately informed of activities and behaviors that promote health and positive outcomes. Comment: A commenter recommended that CMS separate the IQI–11 Abdominal aortic aneurysm (AAA) mortality rate (with or without volume) measure into two distinct measures: one measure for those patients undergoing elective repair and one measure for those undergoing emergency or urgent repair. The commenter believed that this measure should be stratified by open surgical and endovascular repair, and that the risk-adjustment model should be tested prospectively for accuracy. Response: We thank the commenter for this suggestion. AAA repair is a technically difficult procedure with a relatively high mortality rate (we refer readers to https:// www.qualityindicators.ahrq.gov/ modules/iqi_resources.aspx). We have adopted the measure as it is currently specified by the Agency for Healthcare Research and Quality, and endorsed by the NQF which includes both elective and emergent cases and is not stratified. We believe that the measure is appropriately risk-adjusted to account for differences in risk factors in the elective and emergent populations undergoing this procedure. After consideration of the public comments we received, we are finalizing the retention of 56 measures that we finalized in the FY 2011 IPPS/ LTCH PPS final rule for the FY 2014 payment determination. We note that this number includes the four measures which, as discussed above, we are also E:\FR\FM\18AUR2.SGM 18AUR2 51616 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations retaining but on which we are suspending data collection. mstockstill on DSK4VPTVN1PROD with RULES2 (2) Additional Hospital IQR Program Measures for the FY 2014 Payment Determination (A) CDC/NHSN-Based HealthcareAssociated Infection (HAI) Measures HAIs are among the leading causes of death in the U.S. CDC estimates that as many as 2 million infections are acquired each year in hospitals and result in approximately 90,000 deaths per year.8 It is estimated that more 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 healthcare costs. HAIs are largely preventable with widely publicized interventions such as better hygiene and advanced scientifically tested techniques for surgical patients. Therefore, the public reporting of HAIs has been of great interest to many healthcare consumers and advocacy organizations because it promotes awareness and permits health care consumers to choose the hospitals with lower HAI rates, as well as gives hospitals an incentive to improve infection control efforts. To maximize the efficiency and improve the coordination of HAI prevention efforts across the Department, HHS established in 2008 a senior-level Steering Committee for the Prevention of Healthcare-Associated Infections. In 2009, the Steering Committee, along with scientists and program officials across the government, developed the HHS Action Plan to Prevent HAIs providing a roadmap for HAI prevention in acute care hospitals. In the first iteration of the Action Plan, the Steering Committee chose to focus on infections in acute care hospitals because the associated morbidity and mortality was most severe in that setting and the scientific information on prevention and the capacity to measure improvement was most complete. Thus, prevention of HAIs in acute care hospitals became the first phase of the Action Plan and it focuses on six high priority HAI-related areas. In addition, the Steering Committee included in the Action Plan five-year goals for nine specific measures of improvement tied to the six HAI prevention priority areas. Since the release of the first Action Plan in June 8 McKibben L, Horan T, Guidance on public reporting of healthcare-associated infections: Recommendations of the Healthcare Infection Control Practices Advisory Committee. AJIC 2005; 33:217–26 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 2009, the Steering Committee has been developing a successor plan in collaboration with public and private partners which is expected to incorporate advances in science and technology and expand the scope to the outpatient environment. The successor plan is also expected to address the health and safety of healthcare personnel, as well as the risks of influenza transmission from healthcare personnel to patients. The second Action Plan is due for publication in 2011. We also note that the House Committee on Appropriations asked in a 2009 Report that CMS include in its ‘‘pay for reporting’’ system two infection control measures developed by the Hospital Quality Alliance (HQA)— Central line-associated bloodstream infections and a surgical site infection rate (H. Rep. No. 111–220, at 159 (2009)). In the report, the Committee stated that ‘‘if the measures are included in Hospital Compare, the public reporting of the data is likely to reduce HAI occurrence, an outcome demonstrated in previous research.’’ In the FY 2011 IPPS/LTCH PPS final rule, we adopted the two HAI measures identified by the House Committee on Appropriations in its 2009 report: Central Line [catheter] Associated Blood Stream Infection (CLABSI) measure, and Surgical Site Infection (SSI) measure. The CLABSI measure is currently being collected as part of the FY 2013 Hospital IQR measure set, and data submission on the measure began with January 2011 events.9 The Surgical Site Infection (SSI) measure is currently part of the FY 2014 Hospital IQR measure set, and data submission on the measure will begin with January 2012 events. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25894 through 25896), we proposed to adopt two additional HAI measures for the FY 2014 Hospital IQR measure set. These measures are: (1) Central Line Insertion Practices, or CLIP (which is NQF # 298 and operationalized by the CDC for collection through the NHSN); and (2) Catheter Associated Urinary Tract Infection (CAUTI) (NQF # 138). Both measures are high priority HAI measures that are included among the prevention metrics established in the HHS Action Plan To Prevent HAIs which, as we noted above, underscores the importance of reducing HAIs. As detailed below, both measures also meet Hospital IQR Program statutory requirements for measure selection. 9 The CDC captures HAI data based on the onset of an event, rather than based on the discharge date. PO 00000 Frm 00142 Fmt 4701 Sfmt 4700 Furthermore, both measures are currently collected by the NHSN, which is a secure, Internet-based surveillance system maintained and managed by the CDC, and can be used by all types of healthcare facilities in the U.S., 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 patient-level data on the measures mandated through their specific State legislation. Currently, 28 States require hospitals to report HAIs using NHSN, and CDC provides support to more than 4,000 hospitals that are using NHSN. NHSN data collection occurs via a Web-based tool hosted by CDC provided free of charge to providers. In addition, data submission for HAI measures through EHRs may be possible in the near future. Comment: A commenter encouraged CMS to include only those HACs that could reasonably be prevented. A commenter requested clarification on how the proposed HAI measures differ from the ‘‘never events’’ currently being reported. Response: In our selection of HACs, we have to meet the requirements under section 1886(d)(4)(D) of the Act. Section 1886(d)(4)(D) of the Act specifies that by October 1, 2007, the Secretary was required to select, in consultation with the 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. Under this provision, the HACs we select must be reasonably preventable. Many of the HACs also are ‘‘never events’’ or serious reportable events defined by the NQF. The HAI measures, unlike the HACs, are designed to look at more than ICD codes. The CDC criteria for the HAIs rely on chart-abstracted and point of care assessments to identify HAIs. Many of these infections can be identified during the acute stay, before hospital discharge, thereby providing a more real time view of the patient. Comment: A commenter suggested that CMS should propose to adopt only outcome HAI measures rather than E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 process HAI measures. Furthermore, the commenter recommended that CDC should streamline the amount of information required for collection within HAI modules to ease the data collection burden for providers. Response: We agree with the commenters regarding the preference for outcome measures over process of care measures. For example, we discuss below our decision to not finalize the proposed CLIP measure because we have been persuaded by commenters that the CLABSI measure already adopted for the Hospital IQR Program is sufficiently related and captures the outcome of the process of care. We have shared the comment regarding streamlining data collection with the CDC. (i) Central Line Insertion Practice Adherence Percentage (CLIP) Central line associated blood stream infections (CLABSIs) can be prevented through proper management of the central line. The CDC’s Healthcare Infection Control Practices Advisory Committee (CDC/HICPAC) Guidelines for the Prevention of Intravascular Catheter-Related Infections recommends evidence-based central line insertion practices known to reduce the risk of subsequent central lineassociated bloodstream infection.10 These include hand-washing by inserters, use of maximal sterile barriers during insertion, proper use of a skin antiseptic prior to insertion, and allowing that skin antiseptic to dry before catheter insertion. Despite the scientific evidence supporting these practices, several reports suggest that adherence to these practices remains low in United States hospitals. The proposed CLIP process measure is a companion measure to the previously adopted CLABSI measure, and it assesses the extent to which a facility employs practices consistent with CDC/ HICPAC recommendations that are known to reduce CLABSI. There are 2 States that currently require facilities to report to NHSN at least one month of CLIP data. The CLIP measure is used in State reporting initiatives and is an NQFendorsed measure (NQF # 298) that is operationalized for collection by the CDC via the NHSN. Therefore, the measure meets the selection criteria under section 1886(b)(3)(B)(viii)(IX)(aa) of the Act. This CLIP prevention metric is also listed in the HHS Action Plan To 10 O’Grady NP, Alexander M, Dellinger EP, Gerberding JL, Heard SO, Maki DG, et al., Guidelines for the Prevention of Intravascular Catheter-Related Infections. MMWR 2002; 51 (No. RR–10:1–26). VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Prevent HAIs and, as we detailed above, has been widely identified as a high priority for public reporting. Comment: A few commenters strongly believed that the CLABSI measure in the Hospital IQR Program is a valid, wellconstructed, and risk-adjusted outcome measure. These commenters pointed out that the decreasing incidence of central line-associated infections was attributed to the implementation of this measure in early 2011 in conjunction with other ongoing patient safety infection initiatives. Some commenters noted the current CLABSI rates have been excellent. Commenters opposed the adoption of the CLIP measure because they believed that it is labor-intensive to collect, hard to validate, and does not address the need for quick removal of the central line which is the key to reducing CLABSI. Based on these reasons, the commenters opposed the adoption of the proposed CLIP measure, which is a process measure, because the outcome itself (CLABSI) is being already reported by hospitals. Furthermore, one commenter suggested that if CMS adopts the measure, it should clarify that the measure is only applicable to high risk units such as ICUs where central lines are generally placed and should only apply to hospitals with bad CLABSI outcomes. A commenter suggested that the measure be riskadjusted based on the morbidity of the patient at the time of admission. A few commenters recommended delaying the adoption of the proposed CLIP measure until FY 2015 to allow time to refine its specifications. Some commenters requested the removal of the CLABSI HAC claims measure if the CLIP measure is implemented. A commenter believed that the proposed time frame to begin data collection does not allow proper time for hospitals to assure the collection of these elements for all the central line insertions. Response: We agree with the commenters that the existing CLABSI outcome measure is preferable because it captures the outcome that the process of care measure (CLIP) is designed to prevent. Therefore, by measuring the outcome, we are inherently assessing the effectiveness of central line insertion and maintenance processes being employed by the facility. Consistent with our goal to shift toward outcome measures, we are not finalizing our proposal to adopt the CLIP measure for the Hospital IQR measure set. Comment: A few commenters asked CMS for clarification whether the CLIP measure developed by the Institute for Healthcare Improvement (IHI) or the CDC/NHSN CLIP measure is being PO 00000 Frm 00143 Fmt 4701 Sfmt 4700 51617 proposed for adoption into the Hospital IQR measure set. Response: We proposed to adopt the CDC CLIP measure, and we believe that it is an operationalization of the NQFendorsed CLIP measure (NQF # 0298) for which IHI (not CDC) is the steward. Although the NQF-endorsed CLIP measure was developed by the IHI, it is based upon the CDC prevention guidelines for preventing Central Line Associated Blood Stream Infections. However, the CDC specifications for the measure do not require that the hospital report its daily monitoring of central lines. For the reasons stated previously, we will not be adopting the proposed CLIP measure for the Hospital IQR Program at this time. (ii) Catheter Associated Urinary Tract Infection (CAUTI) The urinary tract is the most common site of HAI, accounting for more than 30 percent of infections reported by acute care hospitals.11 Healthcare-associated urinary tract infections (UTIs) are commonly attributed to catheterization of the urinary tract. CAUTI can lead to such complications as cystitis, pyelonephritis, gram-negative bacteremia, prostatitis, epididymitis, and orchitis in males and, less commonly, endocarditis, vertebral osteomyelitis, septic arthritis, endophthalmitis, and meningitis in all patients. Complications associated with CAUTI cause discomfort to the patient, prolonged hospital stay, and increased cost and mortality. Each year, more than 13,000 deaths are associated with UTIs.12 Prevention of CAUTIs is discussed in the CDC/HICPAC document, Guideline for Prevention of Catheter-associated Urinary Tract Infections. The NQF-endorsed CAUTI measure we proposed is currently collected by the NHSN as part of Statemandated reporting and surveillance requirements for hospitals. There are 3 States that require facilities to report to NHSN at least one month of CAUTI data. Section 1886(b)(3)(B)(viii)(IX)(aa) of the Act requires that effective for payments beginning with FY 2013, each measure specified by the Secretary for inclusion in the Hospital IQR Program be endorsed by the entity with a contract under section 1890(a) of the Act, unless the exception set forth in section 1886(b)(3)(B)(viii)(IX)(bb) of the 11 Klevens RM, Edward JR, et al., Estimating Health Care-Associated Infections and Deaths in U.S. Hospitals, 2002. Public Health Reports 2007; 122:160–166. 12 Wong ES., Guideline for Prevention of Catheter-Associated Urinary Tract Infections. Infect Control 1981; 2:126–30. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51618 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Act applies. The NQF currently holds the contract under section 1890(a) of the Act, and the NQF has endorsed this CAUTI measure (NQF # 138). For this reason, we believe that this measure satisfies the endorsement requirement applicable to the Hospital IQR Program. This proposed measure is currently risk stratified, and therefore is consistent with section 1886(b)(3)(B)(viii)(VIII) of the Act. Risk stratification means that it is calculated using different categories of patients with varying risk of developing an infection. At the time of the FY 2012 IPPS/LTCH PPS proposed rule, this CAUTI measure (NQF # 138) was undergoing measure maintenance review by the NQF and we note that the review may result in changes to the specifications. We invited public comment on our proposal to adopt these two HAI measures into the Hospital IQR Program for the FY 2014 payment determination. We proposed that hospitals would begin submitting data on these measures beginning with events that occur on or after January 1, 2012. We also proposed that hospitals use the NHSN infrastructure and protocols, as well as the specifications (available at https://www.cdc.gov/nhsn/ PDFs/HSPmanual/HPS_Manual.pdf) to report the measures for Hospital IQR Program purposes. The proposed reporting mechanism for these HAI measures is discussed in greater detail in section IV.A.5.i. of the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25919 through 25920). Comment: Many commenters supported the CAUTI measure and suggested that CMS monitor a CAUTI project initiative that is underway to test the effects of collecting data for both device days and patient days, each of which might have different implications for the urinary tract infection rate. Several commenters cautioned against using device days as the measure denominator because that might have the unintended consequence of artificially inflating the UTI rate. Response: We thank the commenters for the suggestions. We will monitor this project as suggested by the commenter. Currently, we seek to adopt the measures targeted in the 2009 HHS Action Plan To Prevent HAIs. These measures include the proposed NQFendorsed CAUTI measure and that measure is based on device days. We do not believe that reporting a measure by device days would have a negative effect on patient care or result in patient harm. Comment: A commenter remarked that the measure might encourage hospitals to reduce the CAUTI incidence rate, but would not VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 completely bring the rate down to zero. The commenter also noted that it would be difficult to diagnose every UTI at the time of admission without increasing the volume of potentially unnecessary screenings. The commenter believed that the pressure to remove catheters quickly in the ICU and post-surgery can have unintended consequences and complications. Several commenters stated that the CAUTI measure should have exclusions for patients considered to be high-risk to avoid unintended consequences (for example, removal of catheter too quickly). Commenters believed that this measure should also include a data capture point for catheter reinsertion to collect the rate of repeat instrumentation and infection risk for those with early catheter removal. Response: We thank the commenters for these suggestions. As stated above, UTI is the leading cause of HAIs in the acute care setting, and significantly reducing UTIs is a component of the HHS Action Plan To Prevent HAIs, and we have proposed to use the metric that is listed in the Action Plan. We do not believe that the screening of catheterized patients according to the NQF-endorsed specifications for this measure will cause undue treatment or patient harm. To date, there are no published studies that we are aware of that recommend a urinary catheter be maintained in ICU and post-surgical patients. We also thank the commenters’ suggestions for a catheter reinsertion measure. However, we are not aware of such NQF-endorsed measure. We are adopting the measure as currently specified in order to support the reduction efforts of the HHS Action Plan. However, we have forwarded these suggestions to the CDC. Comment: A few commenters recommended that CMS delay the adoption of this proposed measure to FY 2015 or until: (1) The CDC has addressed the validation and implementation issues; (2) all hospitals have attested to the installation of fully functional EHR systems; (3) hospitals and States have had enough time to develop the proper infrastructure to report these data (only 3 States currently require hospitals to report these data); and (4) the measure is risk-adjusted based on the morbidity of the patient at the time of admission. Response: We disagree with these recommendations. The measure is NQFendorsed with appropriate riskstratification as previously described. We have been working in collaboration with the CDC, and are assured that the measure is ready for implementation in the Hospital IQR Program beginning with January 1, 2012 discharges. The PO 00000 Frm 00144 Fmt 4701 Sfmt 4700 data are collected via the NHSN, and hospitals do not need a fully functional EHR system in order to submit data to the NHSN. Comment: A commenter suggested that CMS retire the current claims-based Catheter-Associated Urinary Tract Infection HAC measure once the proposed CAUTI measure is adopted for the Hospital IQR Program. Response: We agree that the claimsbased CAUTI measure and the NHSN CAUTI measure may overlap. However, because the topic of HAIs is of great importance, and a large quantity of data for the NHSN version of the measure will not be available to CMS for some time, we will continue to utilize the claims-based measure until such time as the NHSN version is available to CMS. We will seek an appropriate time to retire the claims-based version of the measure, taking into account the needs of and impact on other programs, such as the Hospital VBP Program. After consideration of the public comments we received, we are finalizing the CAUTI measure that we proposed to adopt for the FY 2014 payment determination. (B) New Claims-Based Measure In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25896 through 25897), we proposed to add the following new claim-based measure to the Hospital IQR Program measure set for the FY 2014 payment determination: Medicare Spending per Beneficiary. The details of this measure are discussed below. (i) Medicare Spending per Beneficiary Measure Healthcare costs consume an everincreasing amount of our Nation’s resources, straining family, business, and government budgets. Healthcare costs take up a growing share of Federal and State budgets and imperil the governments’ long-term fiscal outlooks. In the U.S., the sources of inefficiency that are leading to rising healthcare costs include payment systems that reward medical inputs rather than outcomes. Medicare is transforming from a system that rewards volume of service to one that rewards efficient, effective care and reduces delivery system fragmentation. In order to further this transformation and help address the critical issue of health care costs, in the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25896 through 25897) we proposed to add a measure of Medicare spending per beneficiary to the Hospital IQR Program measure set for the FY 2014 payment determination. This proposed Medicare E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations spending per beneficiary measure addressing the cost of care is a type of measure that is not currently included in the Hospital IQR Program. We are not aware that the NQF or any other consensus organizations under section 1886(b)(3)(B)(viii)(IX) of the Act have currently endorsed any Medicare spending per beneficiary measures. We will give due consideration under section 1886(b)(3)(B)(viii)(IX)(bb) of the Act to any Medicare spending per beneficiary measures that become endorsed in the future. It is important that the cost of care be explicitly measured so that, in conjunction with other quality measures included in the Hospital IQR Program, we can recognize hospitals that are involved in the provision of high quality care at lower cost. We proposed that this Medicare spending per beneficiary measure would be calculated using claims data for hospital discharges occurring between May 15, 2012 and February 14, 2013. Therefore, the addition of this proposed measure would not increase the data submission burden on hospitals. We outline below the methodology that we proposed to use to calculate the measure. • The Medicare Spending per Beneficiary Episode As we stated in the proposed rule, in order to calculate the Medicare spending per beneficiary for each hospital, we believe that it is necessary to determine: (1) The timeframe, or length of the ‘‘spending per beneficiary episode’’ during which Medicare payments would be aggregated; (2) the types of Medicare payments to be aggregated over this timeframe; and (3) how to adjust or standardize these payments across hospitals (for example, risk adjustment). • Length of the Medicare Spending per Beneficiary Episode Encouraging delivery of coordinated care in an efficient manner is an important goal which can best be achieved through inclusion of Medicare payments made outside the timeframe of the hospital inpatient stay. We proposed to use an episode that runs from three days prior to an inpatient PPS hospital admission (the index admission) through 90 days post hospital discharge. We also sought public comment on an alternative 30-day time period for the initial implementation of this measure that would be more consistent with the 30-day time period currently in use for some outcome measures. We received numerous public comments on the proposed length of the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Medicare spending per beneficiary episode. Comment: The majority of commenters stated an episode spanning 90 days post-discharge was too long to represent factors which are within hospitals’ control, and that a shorter period would focus on factors which are more directly influenced by the hospital. Commenters noted physician care and patient compliance with postdischarge instructions as examples of factors which are outside the hospital’s control. Several commenters suggested a 30-day post-discharge period would be more appropriate. Several commenters noted that a 30-day post-discharge period would be consistent with the measures used in the Hospital Readmissions Reduction Program. One commenter noted that it would be consistent with the bundling pilot included in the Affordable Care Act. Many commenters suggested a 15-day post-discharge period, and a few suggested a 7- or 15-day post-discharge period. Three commenters suggested no more than 14 days, with one suggesting that this shorter period would simplify separation of episodes for complex patients. Response: We are accepting the suggestions that we align the length of the spending per beneficiary episode with other agency initiatives, including the post-discharge period that applies to the readmission measures under the Hospital IQR Program and the one we are adopting in this final rule for the readmission measures we are finalizing for the Hospital Readmissions Reduction Program, for the initial implementation of this measure. We also believe that a shorter length will allow hospitals to gain experience with this measure while we consider whether it would be appropriate to propose to hold them accountable for coordinating services over a longer post-discharge period. Therefore, we are adopting a shorter length of the Medicare spending per beneficiary episode than we proposed for the Medicare spending per beneficiary measure to be included in the FY 2014 Hospital IQR Program. We also believe that a shorter Medicare spending per beneficiary episode will enable us to include a larger number of episodes in the measure calculation because admissions occurring more than 30 days after a discharge will now represent new index admissions, rather than having the Medicare payments associated with them attributed back to the first index admission. This will potentially allow more opportunity for hospitals to improve their performance on the measure. PO 00000 Frm 00145 Fmt 4701 Sfmt 4700 51619 We are finalizing a Medicare spending per beneficiary episode which spans from 3 days prior to hospital admission through 30 days post hospital discharge, for the initial implementation of this measure. Our intent is to revisit the episode length in future rulemaking as we gain more experience with this measure and as hospitals gain more experience in redesigning care processes and coordinating patient care in the post-hospital discharge period, and we will strongly consider lengthening the Medicare spending per beneficiary episode. Comment: A few commenters suggested that a 90-day post-discharge period was not long enough. One commenter suggested that an episode of 1 year or more post-discharge would be required in order to realize savings achieved by selection of treatment alternatives which are more costly initially. Another commenter suggested that a minimum of 6 months would be necessary to recognize system-wide cost savings across all Part A and Part B payments and stated that a 90-day postdischarge period, if adopted, should only count inpatient hospital costs, in recognition that other provider types do not have similar incentives and that readmissions could likely be reduced over 90 days. Response: We acknowledge that including a longer post-discharge period in the Medicare spending per beneficiary episode could recognize system-wide cost savings. However, we are going to implement a 30-day postdischarge period for the measure for the FY 2014 Hospital IQR Program for the reasons discussed above. We intend to revisit the episode length in the future in order to determine whether a longer Medicare spending per beneficiary postdischarge window would be appropriate for incentivizing greater efficiency, care coordination, and care transitions. Comment: One commenter expressed strong support for the 90-day postdischarge period, noting that it encourages the teamwork and care coordination that is necessary to achieve the delivery of high quality, efficient healthcare. Response: We agree that a 90-day episode would encourage teamwork and cooperation for the provision of quality care to Medicare beneficiaries. However, we are finalizing a 30-day post discharge window in order for hospitals to gain experience with the measure, and work toward redesign of care processes, while we consider whether it would be appropriate to propose to hold them accountable for coordinating services over a longer post-discharge period. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51620 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Comment: Several commenters requested clarification as to whether the spending per beneficiary measure was intended to measure general perbeneficiary spending or to measure the per-beneficiary spending of specific hospitals. These commenters suggested that a 90-day post discharge period was appropriate for inclusion in an episode to measure general per-beneficiary spending, but that if that spending was to be attributed to a specific hospital, then a shorter period, such as 7 or 15 days would be more appropriate. Response: The intent of the Medicare spending per beneficiary measure is to measure hospital-specific Medicare spending per beneficiary, as compared to the median Medicare spending amount across all hospitals nationally. We believe that a comparison of individual hospitals’ spending to hospital spending on a national level will best allow hospitals to recognize where opportunities for improved efficiencies exist. We do not believe that display of general per beneficiary spending would achieve this intent, because it would not indicate to hospitals how their individual Medicare spending per beneficiary amount compares to other hospitals. After consideration of all public comments we received on the length of the Medicare spending per beneficiary episode, we are finalizing a Medicare spending per beneficiary episode, spanning from 3 days prior to hospitalization through 30-days post discharge. We are finalizing the policy that only discharges occurring within 30 days before the end of the performance period will be counted as index admissions for purposes of calculating episodes. We intend to revisit the length of the Medicare spending per beneficiary episode as we gain more experience with the use of this measure and as hospitals increasingly focus on working to redesign care processes and to coordinate with other providers of care, in the interest of providing the highest-quality, most efficient coordinated care possible to the beneficiaries they serve. • Medicare Payments Included in the Spending per Beneficiary Episode In order to calculate the Medicare spending per beneficiary, it is necessary to define the Medicare payments included in the spending per beneficiary episode. Subject to the adjustments described below, we proposed to include all Medicare Part A and Part B payments made for services provided to the beneficiary during the episode, including payments made by beneficiaries that we can determine VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 using our claims data, such as Part B deductibles and coinsurance amounts. We believe that this comprehensive inclusion of Medicare Part A and Part B spending emphasizes the importance of care coordination in improving patient care. Encouraging delivery of coordinated care in an efficient manner over an extended time period is an important goal which can best be achieved through the inclusion of comprehensive Medicare Part A and Part B spending. We also proposed that transfers, readmissions, and additional admissions that began during the post discharge period of an index admission would be included in the episode used for calculating the measure. We proposed to exclude from the Medicare spending per beneficiary calculation episodes where at any time during the episode the beneficiary is not enrolled in both Medicare Part A and Medicare Part B, including if the beneficiary is enrolled in a Medicare Advantage plan at any time during the episode or becomes deceased. We also proposed to exclude any episodes where the beneficiary is covered by the Railroad Retirement Board, and where Medicare is a secondary payer. We also proposed to exclude episodes where the beneficiary is not enrolled in both Medicare Part A and Medicare Part B, for the 90 days prior to the episode, because we would not be able to capture all the data necessary for the severity of illness adjustment discussed later in this preamble. The rationale for exclusion of these episodes from the calculation of the Medicare spending per beneficiary is that we do not have full payment data to identify and standardize spending which would otherwise be attributable to these episodes. We received numerous public comments on the payments proposed for inclusion in the Medicare spending per beneficiary measure. Comment: Almost half of the commenters requested clarification of the proposed handling of transfer cases, and many requested clarification of the proposed handling of readmissions. One commenter requested clarification of the proposed handling of cases in which the beneficiary’s primary insurance becomes Medicaid during the episode, due to exhaustion of Medicare Part A benefits. Response: We proposed to include in the spending per beneficiary episode all Medicare Part A and Part B payments made for services provided to the beneficiary during the episode that we can determine using our claims data. Readmissions and transfers would have PO 00000 Frm 00146 Fmt 4701 Sfmt 4700 been attributed to the hospital at which the index hospitalization occurred as long as they occurred during the postdischarge window of the index admission. For example, Medicare payments for any of the following which happened during the hospital stay or the post-discharge window would have been included in the Medicare spending per beneficiary episode: A beneficiary was transferred from the subsection (d) hospital to another subsection (d) hospital for the purposes of receiving inpatient services; a beneficiary was transferred from the subsection (d) hospital to a post-acute care setting, such as a SNF, LTCH, or home; a beneficiary was readmitted to the same subsection (d) hospital; and/or the beneficiary was admitted to a different subsection (d) hospital. As noted above, we are finalizing a Medicare spending per beneficiary episode, spanning from 3 days prior to hospitalization through 30-days post discharge, in response to public comment. Based on public comment, however, we have reconsidered the proposed handling of transfers from one subsection (d) hospital to another, as discussed below. We also note that, in response to public comment, we have reconsidered whether statistical outliers should be included in the Medicare spending per beneficiary amount, and we will exclude them, as discussed below. To clarify our proposal regarding beneficiaries whose primary insurance becomes Medicaid during the episode, due to exhaustion of Medicare Part A benefits, we will not include Medicaid payments made for services rendered to those beneficiaries during the episode, because this is a measure of Medicare spending per beneficiary, not Medicaid spending. We will include all Medicare Part A payments made before benefits are exhausted and all Medicare Part B payments made during the episode, consistent with our policy for inclusion of all Medicare Part A and Part B payments, with the exception of statistical outliers, as discussed below, in the calculation of hospitals’ Medicare spending per beneficiary amounts in all cases. We intend to analyze the impact of including episodes in which beneficiaries’ primary insurance changes to Medicaid in this measure and will consider refinements to this policy in the future. We will also include Medicare payments made for services rendered to beneficiaries who are eligible for both Medicare and Medicaid in the Medicare spending per beneficiary amount. Comment: Several commenters stated that inclusion of Medicare payments for all Part A and Part B services occurring E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations during the post-discharge period would penalize hospitals for ensuring that patients receive necessary postdischarge follow-up care. Response: We do not believe that inclusion of all Part A and Part B Medicare spending during the Medicare spending per beneficiary episode will penalize hospitals for ensuring that beneficiaries receive needed postdischarge care. The measure’s purpose is to assess the amount of payments Medicare makes surrounding an inpatient hospital stay at a subsection (d) hospital, as compared to a national benchmark. We believe that hospitals which provide quality inpatient care and appropriate discharge planning and work with providers and suppliers on appropriate follow-up care will realize efficiencies and perform well on the measure, because the Medicare beneficiaries they serve will have a reduced need for excessive postdischarge services. We believe that including a 30-day post-discharge period, as compared to a shorter postdischarge period, such as 7 or 14 days, will further reduce the risk that hospitals might delay needed postdischarge care. Comment: Six commenters expressed the opinion that readmissions should be excluded from the measure, and four of those commenters believed that the Affordable Care Act prohibits inclusion of readmissions in this measure. Two of those commenters noted that readmissions are addressed in other measures. One commenter suggested that readmissions should not be attributed to the hospital at which the index admission occurred, and another commenter suggested that readmissions should not be treated as index admissions, for the purposes of creating new, distinct episodes. Six commenters suggested that unrelated readmissions should be excluded, and one commenter suggested that unrelated readmissions should not be attributed to the hospital where the index hospitalization occurred. Response: We disagree with the interpretation that the inclusion of Medicare spending for readmissions is contrary to the intent of the Affordable Care Act that the Hospital VBP Program may not include measures of readmissions. The Medicare spending per beneficiary measure is not a measure of readmission rates, but rather it is a measure of total Medicare spending per beneficiary, relative to a hospital stay. A Medicare spending per beneficiary measure is required by the Affordable Care Act to be included in the Hospital VBP Program, and therefore, in the Hospital IQR Program. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 We believe that the Medicare payments made for readmissions must be attributable to the index hospital stay, in order: to fully capture Medicare spending relative to a hospital stay; to encourage the provision of comprehensive inpatient care, discharge planning, and follow-up; and to strengthen incentives to reduce readmissions. With regard to exclusion of unrelated readmissions, we acknowledge the commenters who suggested that unforeseen events which are unrelated to the hospital stay could occur. However, we note that the measure is consistent with all cause readmission measures and that determinations of the degree of relatedness of each subsequent hospital stay to an initial hospitalization could be subjective and prohibitively complex. We believe that inclusion of all readmissions in the episode attributable to the index hospital stay is the best way to encourage quality inpatient care, care coordination, and care transitions. We note that all hospitals will be subject to the same method of calculation of their Medicare spending per beneficiary amounts, as compared to the median Medicare spending per beneficiary amount across all hospitals, so we do not believe that inclusion of all readmissions will notably disadvantage any individual hospital. We also note that, in response to public comment, we will exclude statistical outliers from the calculation of the Medicare spending per beneficiary amount, as discussed below. We agree with the commenter who suggested that a readmission occurring during a Medicare spending per beneficiary episode should not represent a new index hospitalization, for the purpose of generating a new Medicare spending per beneficiary episode. We also acknowledge the importance of aligning payment initiatives across CMS. Based on our consideration of the comments we received, we are shortening the proposed post-discharge period included in the Medicare spending per beneficiary episode to 30 days in this final rule, which is consistent with the Hospital Readmissions Reduction Program. Comment: One commenter stated that no services for conditions unrelated to the index hospitalization should be attributed to the hospital at which that hospitalization occurred. Response: We acknowledge the fact that health events which are unrelated to the hospital stay could occur and require treatment post-discharge, during the Medicare spending per beneficiary episode. However, we believe that PO 00000 Frm 00147 Fmt 4701 Sfmt 4700 51621 determinations of the degree of relatedness of each subsequent hospital stay to an initial hospitalization would be subjective and prohibitively complex. In order to capture the potential efficiencies which hospitals might achieve through provision of comprehensive, high-quality inpatient care, discharge planning, and care transitions, we believe that it is necessary to capture all Part A and Part B Medicare payments which occur during the Medicare spending per beneficiary episode surrounding the hospital stay. We also note that all hospitals will be subject to the same method of calculation of their Medicare spending per beneficiary amounts, as compared to the median Medicare spending per beneficiary amount across all hospitals, so we do not believe that inclusion of all post-discharge follow-up care will notably disadvantage any individual hospital. Again, we note that, in response to public comment, we will exclude statistical outliers from the calculation of the Medicare spending per beneficiary amount, as discussed below. Comment: Four commenters stated that transfer cases should be excluded, in order to avoid penalizing hospitals often called upon to receive transfers, because follow-up care may be received in a region outside the influence of the hospital receiving the transfer, and for consistency with the Hospital Readmissions Reduction Program. Response: The comments regarding attribution of Medicare payments for hospitalizations resulting in acute to acute transfers, and specifically, the potential impact on hospitals who transfer patients to another subsection (d) hospital or those who receive large numbers of transfers, have persuaded us that that the attribution of Medicare payments for hospitalizations resulting in acute to acute transfers requires further consideration. At this time, we will exclude cases involving acute to acute transfers from being considered index admissions. A case involving an acute to acute transfer will therefore not generate a new Medicare spending per beneficiary episode. This means that neither the hospital which transfers a patient to another subsection (d) hospital, nor the receiving subsection (d) hospital will have an index admission attributed to them for an acute-to-acute transfer case. The rationale for exclusion of these acute to acute transfer cases as index admissions is that CMS wishes to perform further analysis of hospital impacts and explore potential unintended consequences of attribution of the Medicare spending per beneficiary episode relative to the cases E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51622 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations to either the transferring or the receiving hospital. Therefore, at this time we will exclude acute-to-acute transfer cases from being counted as index admissions, and these cases will not create a new Medicare spending per beneficiary episode. However, if a patient is readmitted during the postdischarge window and then transferred to another acute care hospital, we will attribute these costs to the hospital where the original index admission occurred. For example, if a beneficiary is hospitalized in a subsection (d) hospital (Hospital A), then discharged from that hospital to home or to another subacute level of care, such as a SNF, then that hospitalization would represent an index admission, and the Medicare Part A and Part B payments (with the exception of statistical outliers) which are made during the Medicare spending per beneficiary episode spanning from 3 days prior to admission through 30 days post discharge (including payments to a subacute facility) would be included in the Medicare spending per beneficiary amount attributed to Hospital A. We would also include, in the total Part A and Part B payments attributed to hospital A, any Medicare payments made for the beneficiary’s readmission to the same or a different subsection (d) hospital during the 30 day postdischarge window, including any case where during that subsequent hospitalization, the beneficiary is transferred to another subsection (d) hospital. Comment: Several commenters offered their views regarding the importance of looking at Medicare spending concurrently with other measures of quality, and potential unintended consequences of a measure which is specific to Medicare spending. These commenters stated that the scope of the measure should not be Medicare spending alone, but that spending data should be tied to other measures. One commenter suggested that the measure should assess conformity toward an endorsed care process. Several commenters stated that an efficiency measure should measure cost concurrently with quality or outcomes measures, and three commenters stated that Medicare spending data could be misinterpreted in the absence of quality data. One commenter stated that the measure should be implemented for FY 2014, but should be adjusted to tie in a new HCAHPS measure of care transitions. Three commenters stated that a spending-only measure could result in the unintended consequence of efforts to cut cost by limiting needed VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 care, and another commenter suggested that it could result in a risk of hospital avoidance of complex patients. One commenter stated that the measure would penalize hospitals that work to keep all but the sickest patients out of the hospital. One commenter stated that the measure would result in physicians placing more patients into inpatient care, post hospital discharge, in order to assure proper care transitions, and one commenter questioned the measure’s inclusion in a quality reporting program when it does not inherently measure quality. Response: We agree with the commenters that it is useful to view a measure of Medicare spending per beneficiary in conjunction with other quality measures. We will provide explanatory language on Hospital Compare, in order to assist beneficiaries in interpreting the Medicare spending per beneficiary measure data. We also note that we developed this measure with the intent of including it in the Hospital VBP Program, where it will represent the first measure in a new Efficiency domain. Under that program, we will weight and combine the Efficiency domain with the other, individual domain scores, in order to calculate each hospital’s Total Performance Score (TPS). This procedure for calculating a TPS ensures that spending per beneficiary makes up only a portion of the TPS, and that the remainder is based on hospitals’ performance on the other measures. We disagree that Medicare spending per beneficiary should be tied to a new HCAHPS measure. The Affordable Care Act requires the inclusion of efficiency measures, and specifically the inclusion of a measure of Medicare spending per beneficiary, in the Hospital VBP Program, which in turn, means that the measure must also be adopted for the Hospital IQR Program. We believe the intent of this statutory mandate is for Medicare spending to be independently measured. The data for the Medicare spending per beneficiary measure will be posted on Hospital Compare, along with the other hospital quality measure data available on that Web site. We will also provide explanatory language, in order to assist beneficiaries in interpreting the Medicare spending per beneficiary measure data. We appreciate the commenters’ concerns regarding unintended consequences of a spending per beneficiary measure, and will monitor for any utilization changes which may result from this measure. We disagree that the measure will penalize hospitals that work to keep all but the sickest beneficiaries out of the PO 00000 Frm 00148 Fmt 4701 Sfmt 4700 hospital. We proposed to utilize the primary diagnoses and comorbidities from claims submitted during the 90days preceding the Medicare spending per beneficiary episode to risk-adjust Medicare payments made for services provided to beneficiaries during an inpatient hospital stay and during the Medicare spending per beneficiary episode surrounding the stay. We believe that this will adequately account for hospital treatment of complex patients. We also disagree with the comment that the measure provides an incentive for increased discharges from hospitals to other inpatient settings. We believe that hospitals will have an incentive to coordinate care and discharge beneficiaries to the most appropriate setting, including utilizing less-costly outpatient levels of care for post-discharge care. With regard to inclusion of the Medicare spending per beneficiary in a quality reporting program, we disagree with the comment that it does not belong in the program. We believe that hospitals’ provision of quality, coordinated care will result in more efficient and effective delivery of care for Medicare beneficiaries and provides an incentive to eliminate unnecessary services. Therefore, we believe that a measure of Medicare spending per beneficiary is a measure of quality. Comment: Two commenters objected to the use of an episode in the Medicare spending per beneficiary measure because they believed that it did not meet the intent of the Affordable Care Act to measure spending per beneficiary. Response: The Affordable Care Act requires that the Hospital VBP Program include measures of efficiency, including Medicare spending per beneficiary. As we expand the Hospital VBP Program Efficiency domain, we will consider adding additional measures of efficiency, which could include measures of internal hospital efficiencies, through future rulemaking. Comment: One commenter suggested that spending for Medicare Advantage beneficiaries should be included in the measure, because non-managed care beneficiaries are costlier. Response: We do not have evidence that managed care beneficiaries are less expensive. In order to minimize burden on hospitals, CMS has proposed the Medicare spending per beneficiary measure as a claims-based measure. Therefore, we cannot include spending for managed care beneficiaries in the measure calculation since we do not have fee-for-service claims for these patients. In order to fairly compare hospitals’ spending, we have proposed E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations to exclude from the measure any episodes in which we do not have complete Medicare FFS claims data, such as those enrolled in Medicare Advantage plans. We will account for the complexities and resulting costs associated with caring for Medicare beneficiaries who have complex conditions by risk-adjusting for beneficiary age and severity of illness. Comment: One commenter suggested that Medicare payments for drugs should be included, because expenditure on a new technology, for example, could offset future costs for drugs. Response: We appreciate this comment and will take it into consideration in future rulemaking for the Medicare spending per beneficiary measure. At this time, we are able to include Part A and Part B payments, so payments for Part B drugs will be included in the Medicare spending per beneficiary amount. We will consider whether to propose to include Medicare payments made under the Medicare Part D drug payment system in the future. Comment: Two commenters stated that a hospital cost efficiency measure should be limited to hospital resource use, such as resources used to treat HAIs and falls, or provision of appropriate lengths of stay. Response: We disagree with these comments. The Affordable Care Act requires that the Hospital VBP Program include measures of efficiency, including Medicare spending per beneficiary. We do not believe that a measure of hospital resource use, rather than Medicare payments, as suggested by the commenters, would meet the intent of the law that we include a measure of Medicare spending per beneficiary. As we expand the Hospital VBP Program Efficiency domain, we will consider adding additional measures of efficiency, which could include measures of internal hospital efficiencies, through future rulemaking. Comment: One commenter stated that CMS policies should not punish the most efficient states and that CMS should seek savings from providers and regions that use the highest levels of respurces to care for patients. Response: We agree that efficient providers should not be penalized, and we believe they will be incentivized under this measure. We are finalizing our proposal to calculate hospitals’ Medicare spending per beneficiary ratios as compared to the median spending across all hospitals; therefore, we believe that hospitals who demonstrate efficiencies in the provision of care for their patients will VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 perform well on the measure, regardless of where the hospital is located. Comment: Two commenters stated that there was no scientific or evidentiary support for the measure. Response: We recognize that this Medicare spending per beneficiary measure is a new type of measure for the Hospital IQR and Hospital VBP Programs. A measure of Medicare spending per beneficiary is is mandated by the Affordable Care Act, so we developed a measure to capture Medicare payments made in an episode surrounding a hospital stay, in order to compare hospitals’ individual spending to spending across all hospitals. We considered many factors in developing the measure and outlined in detail our methodology in the proposed rule. We believe that this measure will provide an incentive to hospitals to redesign care systems in order to better coordinate and provide high-quality, cost-efficient care to Medicare beneficiaries. As we gain more experience with the use of this new type measure for the Hospital IQR Program, we will continue to analyze and refine the measure as appropriate, based on that experience. Comment: Several commenters recommended that the scope of Medicare payments included in the Medicare spending per beneficiary be narrowed. MedPAC suggested focus on a subset of episode costs associated with the stay, such as the stay itself and post acute care provided during a shortened post-discharge period. Two commenters suggested use of condition-specific measures to address costs associated with diagnoses such as acute myocardial infarction (AMI), heart failure (HF), or pneumonia. One commenter suggested that the measure should be better targeted, consistent with the Hospital Readmissions Reduction Program and the bundling pilot, and another commenter suggested that the measure should use criteria similar to those required for the bundling pilot. One commenter suggested that the measure be limited to inpatient hospital spending over 90 days, in an effort to reduce readmissions through care coordination, but with the recognition that other types of providers do not have the same incentives to reduce Medicare spending. Response: We appreciate the commenters suggestion that the Medicare spending per beneficiary measure should be aligned with measures used in other Medicare payment incentive programs. We believe that inclusion of Medicare spending for all Part A and Part B services in the calculation of the PO 00000 Frm 00149 Fmt 4701 Sfmt 4700 51623 hospital’s Medicare spending per beneficiary amount aligns with the aim of reducing readmissions under the Hospital Readmissions Reduction Program. We also note that the bundling pilot is under development and we will seek to align the Hospital VBP Program with that program as it develops. We appreciate the comments regarding the use of targeted or condition-specific measures in the interest of aligning with other CMSinitiatives. While the Affordable Care Act does not limit the Secretary to adopting only one efficiency measure, it does specify that the efficiency measures must include a measure of Medicare spending per beneficiary, not per condition. At this time, we believe that inclusion of Medicare spending related to hospital stays for all diagnoses is the best approach to enable hospitals identify where opportunities for improved coordination and efficiency exist, by measuring hospitals’ individual Medicare spending per beneficiary amount, as compared to Medicare spending per beneficiary on a national basis. We will consider adding condition-specific measures to the Hospital IQR Program and to the Efficiency domain in the Hospital VBP Program in the future, through rulemaking. We have shortened the post-discharge period during which Medicare payments will be included in the calculation of the Medicare spending per beneficiary amount in order to more closely align the measure with the Hospital Readmissions Reduction Program and other related initiatives. We disagree with the comment that only inpatient payments should be counted toward the Medicare spending per beneficiary amount. As we explained above, we do not believe that inclusion of inpatient hospital payments only will sufficiently address the need for care coordination and care transitions across all settings, in the interest of providing the highest-quality, most efficient care to Medicare beneficiaries. Comment: Some commenters stated that CMS should collect more data regarding the impact of inclusion of spending for post-acute care services in the measure, due to variability in access across different geographic areas, prior to including spending for these services in the measure. Two commenters suggested that no post-discharge services should be included in the measure, and expressed their belief that post-discharge services are not within a hospital’s control. A few commenters stated that the measure should address processes or outcomes which are under E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51624 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations hospital control, and that all Medicare spending within a 90-day post-discharge period is not under hospital control. A few commenters expressed that postdischarge payments depend more on physician management, beneficiary compliance with care planning, and community resources than they depend on care coordination by the hospital. Response: We acknowledge the comments that geographic variability in access to post-acute care services exists. However, we believe that hospitals have a responsibility to encourage the highest-quality, most coordinated and efficient care for the beneficiaries they serve, regardless of their geographic location. We disagree with commenters who stated that Medicare spending for postdischarge services is outside the hospitals’ control, even within a 90-day post-discharge period. (As previously discussed, we are finalizing a 30-day post-discharge period for the initial implementation of this measure.) We believe that as hospitals focus on working to redesign care systems and to coordinate with other providers of care they can have a significant impact on the quality and efficiency of services provided to the Medicare beneficiaries they serve. As a result, we plan to revisit the issue of expanding the episode duration by lengthening the period of time post discharge in future rulemaking. We acknowledge that physician management, beneficiary compliance with post-discharge instructions, and availability of community resources contribute to Medicare spending after hospital discharge. However, we believe that hospitals have a significant influence on Medicare spending during the episode surrounding a hospitalization, through the provision of appropriate, highquality care before and during inpatient hospitalization and through proper hospital discharge planning, care coordination, and care transitions. We believe that this measure will add an additional incentive for hospitals to apply this influence in ways that will promote the provision of the highest quality, most efficient care for hospitalized Medicare beneficiaries. After consideration of all public comments we received on our proposals regarding which Medicare payments we will include in the Medicare spending per beneficiary episode, we are finalizing the inclusion of Medicare payments for all Part A and Part B services rendered to Medicare beneficiaries during the Medicare spending per beneficiary episode, with the exception of statistical outliers, in the Medicare spending per beneficiary VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 amount, which we will attribute to the hospital at which the index admission occurred. We will exclude cases involving acute to acute transfers from being counted as index admissions. A case involving an acute to acute transfer will therefore not generate a new Medicare spending per beneficiary episode. This means that neither the hospital which transfers a patient to another subsection (d) hospital, nor the receiving subsection (d) hospital will have an index admission attributed to them for purposes of creating a Medicare spending per beneficiary episode. However, if a patient is readmitted during the post-discharge window and then transferred to another acute care hospital, we will attribute these costs to the hospital where the original index admission occurred. We will attribute Medicare payments for acute to subacute transfers, such as discharges from a subsection (d) hospital to a SNF, IRF, or LTCH, to the index admission, as proposed. • Adjusting the Medicare Payments Included in the Spending per Beneficiary Episode Section 1886(o)(2)(B)(ii) of the Act requires that a Medicare spending per beneficiary measure adopted for the Hospital VBP Program be ‘‘adjusted for factors such as age, sex, race, severity of illness, and other factors that the Secretary determines appropriate.’’ Consistent with these statutory requirements, we proposed to adjust the proposed Medicare spending per beneficiary measure for age and severity of illness. We proposed to adjust for severity of illness based on the hierarchical condition categories (HCCs) for the period 90 days prior to the episode and based on the MS–DRG during the index admission. Adding the MS–DRG to the use of the HCC improves the severity of illness adjustment and better standardizes the data, allowing for more valid comparisons of Medicare spending per beneficiary amounts across hospitals. Note that we would exclude episodes where the beneficiary is not enrolled in both Medicare Part A and Medicare Part B, for the 90 days prior to the episode because we would not be able to capture all the data necessary for the severity of illness adjustment. We did not propose to adjust the Medicare spending per beneficiary for sex and race, consistent with our understanding of NQF’s position strongly discouraging adjusting measures based on these factors. In addition, we proposed to exclude geographic payment rate differences (for example, based on the wage index and PO 00000 Frm 00150 Fmt 4701 Sfmt 4700 geographic practice cost index) in order to standardize the spending per beneficiary. We did not propose to adjust for geographic differences in spending that are unrelated to geographic payment rate differences. However, we sought comment on whether there are geographic factors other than payment rate differences that should be considered in the spending per beneficiary measure. We also proposed to standardize spending by excluding the portion of IPPS payments resulting from the payment differentials caused by hospital-specific rates, IME, and DSH. We did not propose to exclude spending for hospitals that are paid Hospital-Specific Rates, rather we proposed to exclude the differential additional spending that results from the use of the hospital-specific rates. Making these adjustments allows for more valid comparisons of Medicare spending per beneficiary amounts across hospitals. For example, without adjusting for geographic payment rate differences, a hospital might have higher or lower spending per beneficiary amounts compared to other hospitals based on its wage index and not its performance. Comment: The majority of commenters supported the proposal to adjust for beneficiary age and severity, as well as for geographic and hospitalspecific payment differences. Many commenters suggested that payment standardization should also go further, to adjust for beneficiary demographic and socioeconomic factors, including sex, race, working status, disability status, and Medicaid eligibility. Response: We appreciate the comments supporting the severity of illness and age adjustments proposed. We disagree with the comments that risk-adjustment for the Medicare spending per beneficiary measure should include further adjustment for socioeconomic factors. Consistent with NQF’s position on not adjusting for potential demographic (sex or race) or socioeconomic factors, we believe that the best adjustment for a payment measure is based on the beneficiaries’ underlying health status, not demographic or socioeconomic factors. We intend to further analyze the implications of risk-adjustment for additional factors; however at this time, we feel that for initial implementation, consistency with the NQF position is the best approach to risk-adjusting the Medicare spending per beneficiary measure. As we proposed, we will take into account the underlying health status and acuity levels for all patients before the episode in risk-adjusting E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations because these factors reflect the complexities these patients may present. Comment: Three commenters suggested that physician services should be risk-adjusted, as well as the hospital services. Response: We agree with these commenters. We intend to adjust total Medicare Part A and Part B payments for services received during hospitalization as well as for those received during the episode surrounding the hospital stay. Comment: One commenter stated that there is little evidence that the use of the diagnosis categories used for hierarchical condition category (HCC) scores accurately quantify severity. Three commenters suggested that HCCs should look back further than 90 days, and one stated that they should factor in not only primary diagnoses, but also comorbities. Response: First, we are clarifying that we are not applying the HCCs in a hierarchical manner, in which some diagnoses would in effect cancel others out. Rather, we are utilizing the diagnosis codes, both primary diagnoses and comorbidities, from the 90 days preceding the Medicare spending per beneficiary episode to risk adjust the Medicare Part A and Part B payments for services received during the Medicare spending per beneficiary episode. We believe that this approach is sensitive to all of the diagnoses most directly affecting the hospital stay. In addition, we will perform a risk adjustment for the beneficiary’s age. We are open to future refinements to the risk-adjustment methodology, including potentially looking back further than 90 days for risk adjustment to the Medicare spending per beneficiary episode calculation, in future rulemaking. Comment: Some commenters suggested that CMS should also exclude from the calculation of the Medicare spending per beneficiary measure any payment differences resulting from other policy or incentive payments, including payment differences for physician services rendered in Federally-qualified health centers (FQHC), rural health center (RHC), and Outpatient PPS (OPPS) settings, new technology add-ons, sole community providers, and Medicare-dependent hospitals, as well as incentives from the Hospital VBP Program, meaningful use under the EHR Incentive Program, PQRS, or other current or future incentive payment adjustments. Response: We agree with the commenters that Medicare payment incentives, including the Hospital VBP Program, meaningful use under the EHR Incentive Program, PQRS, should not be VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 factored in to the Medicare spending per beneficiary amount. They will not be included, in order to avoid penalizing high-quality and efficient hospitals. Likewise, we will exclude hospitalspecific rates from the Medicare spending per beneficiary amount, so payment differentials for sole community hospitals and Medicaredependent hospitals would not be included. We are excluding these payment adjustments from the calculation of the Medicare spending per beneficiary amount because we believe that they represent differences in the Medicare payments made to these types of hospitals, rather than differences resulting from hospitals’ choices in provision of care or coordination of post-discharge services. We disagree with the comment that the Medicare spending per beneficiary amount should be adjusted for the differential amount paid for physician services rendered in RHCs, FQHCs, or OPPS setting. First, we believe that adjustment for these ‘‘site of services’’ differences would undermine the ability of this measure to meaningfully capture differences in Medicare spending per beneficiary related to inpatient hospitalizations. Also, we do not believe that adjusting out such differences would result in a significant impact to any hospital’s Medicare spending per beneficiary amount or their subsequent value-based incentive payment amount. Physician services make up only a portion of the Medicare payments which are summed to calculate a hospital’s Medicare spending per beneficiary amount, so the differential impact of physician services on the measure would be further minimized. In addition we are moving to a 30-day post-discharge period, which we believe will further reduce the impact of any payment differentials resulting from the receipt of physician services in various settings. We are therefore not adjusting out differential payments made for physician services based on site of service such as RHCs, FQHCs, or OPPS settings. We appreciate the comments on adjusting for the new-technology add-on payment. We intend to address this payment through future rulemaking, prior to the implementation of the FY 2014 Hospital VBP Program payment adjustment, and we will seek to align with other CMS incentive programs in addressing new technology add-on payments. Comment: Four commenters stated that CMS should adjust for hospital case mix, in order to avoid penalizing hospitals serving specific populations, such as transplant centers or areas with PO 00000 Frm 00151 Fmt 4701 Sfmt 4700 51625 high levels of chronic illness. One commenter suggested that CMS could adjust for underuse, or hospitals’ failure to provide needed care, in order to avoid setting a benchmark reflecting underuse, and for overuse, or excessive use of healthcare services, due to poverty by stratifying the beneficiaries into cohorts reflecting disability status and Medicaid eligibility status. Response: We disagree that an additional adjustment should be made to the Medicare spending per beneficiary amount to account for hospital case mix. As we proposed, we are applying a severity adjustment on a per-beneficiary basis, so hospitals serving large proportions of Medicare beneficiaries with complex conditions will not be disadvantaged. We appreciate the comment regarding stratifying beneficiaries according to disability and Medicaid eligibility status, as a method to avoid setting benchmarks and making comparisons which are not appropriate for all populations. At this time, we are implementing this measure with adjustments for beneficiary age and severity of illness, which is consistent with NQF’s position on not riskadjusting potential race, socioeconomic, or gender disparities. Stratification of beneficiaries is an approach which we may consider in future refinements to the risk adjustment methodology, through future rulemaking. We intend to analyze the risk-adjustment methodology, as we gain experience with this measure, for potential changes to the methodology we are finalizing for the initial implementation. Comment: Two commenters suggested that CMS convene a panel to determine the best risk-adjustment strategy. One commenter suggested that no further risk adjustment beyond what was proposed should be undertaken without further analysis. Response: We agree that a panel may be a useful tool in achieving consensus on a strategy. We are open to suggestions for future refinements to the Medicare spending per beneficiary measure, for future fiscal years’ payment adjustments. However, at this time convening a panel would delay implementation of this important measure emphasizing coordination and efficiency in the delivery of health care services to Medicare beneficiaries. After considering all public comments we received on our proposals for adjusting the Medicare payments included in the Medicare spending per beneficiary episode, we are finalizing our proposal to adjust the Medicare spending per beneficiary amount for beneficiary age and severity of illness, E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51626 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations as calculated by applying the hierarchical condition categories which apply to the beneficiary during the 90 days preceding the Medicare spending per beneficiary episode. We will also adjust for geographic payment differences such as wage index and geographic practice cost differences. We will further adjust for Medicare payment differences resulting from hospital-specific rates, IME and DSH payments, as proposed. In addition, in response to public comment as discussed above, we will exclude statistical outliers and Medicare payment incentives, including the Hospital VBP Program, meaningful use under the EHR Incentive Program, and PQRS incentives, from the calculation of the Medicare spending per beneficiary amount. • Calculating a Hospital’s Medicare Spending per Beneficiary Amount For each subsection (d) hospital participating in the Hospital IQR Program, we proposed to add together all the adjusted Medicare Part A and Part B payments, as defined above, with the exception of statistical outliers, included in all the Medicare spending per beneficiary episodes, as defined above, for that hospital. We would then divide this sum by the total number of Medicare spending per beneficiary episodes for that hospital. The resulting amount would constitute the hospital’s Medicare spending per beneficiary amount for the period. The discharge period that we proposed to apply the proposed measure for the FY 2014 Hospital IQR Program is May 15, 2012 through February 14, 2013. Comment: A few commenters questioned whether CMS has sufficient internal controls to ensure accurate calculation of a complex measure spanning time and service areas. Three commenters expressed concern that outliers would skew the calculation. Response: We acknowledge that a Medicare spending per beneficiary measure is new to the Hospital IQR Program. However, we will have in place internal checks to ensure that calculations are complete and accurate. Hospitals wil also have an opportunity to review and correct any information made public about them, with respect to this measure. We agree with the commenters’ suggestion that statistical outliers should be excluded, so that low-volume hospitals are not potentially disadvantaged by one or two anomalous high-cost outliers having a significant impact on their Medicare spending per beneficiary amount. We will exclude them from the calculation of individual hospitals’ Medicare spending per VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 beneficiary amount and from the calculation of the median Medicare spending per beneficiary amount across hospitals. Comment: Nine commenters requested that the data used to calculate the Medicare spending per beneficiary amount be made public in time for public comment, and so that hospitals and advocacy groups could check CMS’ calculations. One commenter suggested that a relative-value unit (RVU) system be used for simplicity and transparency in calculating standardized payment amounts. Response: We appreciate the suggestion that an RVU system could be used for the calculation of a Medicare spending per beneficiary amount and may consider such an approach for future refinements through rulemaking. We understand the importance of hospital access to data used to calculate the Medicare spending per beneficiary measure. In response to these comments, we intend to make a public use file available, so that hospitals can determine their own historical Medicare spending per beneficiary amounts and identify the drivers of those amounts. After considering the public comments received on our proposals for calculating a hospital’s Medicare spending per beneficiary amount, we are finalizing calculation of a Medicare spending per beneficiary amount which is inclusive of most Medicare Part A and Part B payments made for services provided to Medicare beneficiaries during the Medicare spending per beneficiary episode. In addition to the exclusions we identified above, we will exclude statistical outliers from the calculation of individual hospitals Medicare spending per beneficiary amounts and from the calculation of the median Medicare spending per beneficiary amount across hospitals. We intend to make a public use file available so that hospitals may determine their own historical Medicare spending per beneficiary amounts. • Calculating a Hospital’s Medicare Spending per Beneficiary Ratio We proposed to calculate a hospital’s Medicare spending per beneficiary ratio as the hospital’s Medicare spending per beneficiary amount divided by the median Medicare spending per beneficiary amount across all hospitals. As noted above, we also proposed to adopt this proposed measure for the Hospital VBP Program FY 2014 measure set. The proposed method for scoring and incorporating this Medicare spending per beneficiary ratio into the hospital’s TPS for the Hospital VBP Program, as part of a new Efficiency PO 00000 Frm 00152 Fmt 4701 Sfmt 4700 domain, is fully described in section IV.B.3.b.(3)(C) of the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25928) and the method we are adopting is fully described in section IV.B.3.b.(3)(C) of this final rule. The proposed weighting for the Efficiency domain is proposed in the FY 2012 OPPS/ASC proposed rule. Comment: One commenter suggested that CMS use the mean, rather than the median spending per beneficiary amount for the purposes of calculating the Medicare spending per beneficiary ratio, stating that the mean is less sensitive to being skewed by outliers. Response: We disagree with the comment that the median is more sensitive to being skewed by outliers than the mean is. That is why we proposed to use the median for the purposes of comparison and calculation of the Medicare spending per beneficiary ratio. Furthermore, we are finalizing our proposal to exclude outliers from the calculations. Comment: MedPAC suggested that CMS should align incentives for hospitals and post-acute care providers to reduce readmissions, toward an end goal of alignment of incentives across the sectors, in order to improve the quality and reduce the cost of episodes of care, and to reduce the number of unnecessary inpatient episodes. Response: We agree that alignment of incentives is an important goal. We will keep that goal in mind as we work to refine the Medicare spending per beneficiary measure. However, we acknowledge that this measure alone would not be a sufficient vehicle to fully accomplish that goal. After consideration of the public comments received on our proposal for calculating a hospital’s Medicare spending per beneficiary ratio, we are finalizing our proposal to calculate individual hospitals’ Medicare spending per beneficiary ratios as their individual Medicare spending per beneficiary amount divided by the median Medicare spending per beneficiary amount across all hospitals. In summary, after consideration of all public comments we received, we are finalizing the following policies related to the inclusion of the Medicare spending per beneficiary measure in the Hospital IQR Program. We are finalizing a Medicare spending per beneficiary episode, spanning from three days prior to hospitalization through 30-days post discharge. We are finalizing the policy that only discharges occurring within 30 days before the end of the performance period will be counted as index admissions. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 We are finalizing the inclusion of all Medicare Part A and Part B payments for services rendered to Medicare beneficiaries during the Medicare spending per beneficiary episode, with the exception of statistical outliers, in the Medicare spending per beneficiary amount, which we will attribute to the hospital at which the index admission occurred. We are finalizing that cases involving acute to acute transfers will be excluded from being counted as index admissions and that those cases will not generate new Medicare spending per beneficiary episodes. We are finalizing our proposal to adjust the Medicare spending per beneficiary amount for beneficiary age and for severity of illness, as calculated by applying the hierarchical condition categories which apply to the beneficiary during the 90 days preceding the Medicare spending per beneficiary episode. We are finalizing our proposal to adjust for geographic payment differences such as wage index and geographic practice cost differences. We are finalizing our proposal to adjust for Medicare payment differences resulting from hospital-specific rates, IME and DSH payments, and to adjust for Medicare payment incentives, including Hospital VBP Program, meaningful use under the EHR Incentive Program, and PQRS. We are finalizing calculation of a Medicare spending per beneficiary amount which is inclusive of all Medicare Part A and Part B payments made for services provided to Medicare beneficiaries during the Medicare spending per beneficiary episode surrounding an index hospitalization, excluding statistical outliers. We intend to make a public use file available so that hospitals may determine their own historical Medicare spending per beneficiary amount. We are finalizing our proposal to calculate individual hospitals’ Medicare spending per beneficiary ratios as their individual Medicare spending per beneficiary amount divided by the median Medicare spending per beneficiary amount across all hospitals. We note that after consideration of the comments, this measure is also being finalized for inclusion in the Hospital VBP Program, and this discussion is located in section IV.B.3.b. of this final rule. (C) New Web-Based Structural Measure Structural measures assess the characteristics and capacity of the provider to deliver quality health care. In the FY 2009 IPPS final rule, we finalized the ‘‘Participation in a Systematic Database Registry for Cardiac VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Surgery’’ measure (73 FR 48609) for the FY 2010 payment determination. This measure does not require the hospital to actually participate in a cardiac surgery registry, instead, it only requires the hospital to report whether or not it participates in a cardiac surgery registry. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43871 and 43872), we adopted two more structural measures: Participation in a Systematic Clinical Database Registry for Stroke Care; and Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care under the Hospital IQR Program for the FY 2011 payment determination. Based on public comments, we collect these structural measures once annually. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25897 through 25898), we proposed to include a new structural measure, Participation in a Systematic Clinical Database Registry for General Surgery, in the Hospital IQR Program beginning with the FY 2014 payment determination. The Participation in a Systematic Clinical Database Registry for General Surgery measure would require each hospital that participates in Hospital IQR Program to indicate whether it is participating in a Systematic Clinical Database Registry for General Surgery and, if so, to identify the registry. This measure, like two of the previously adopted structural measures on registry participation (Participation in a Systematic Clinical Database Registry for Stroke Care; and Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care), is an application of an NQF-endorsed measure (NQF # 0493) ‘‘Participation by a physician or other clinician in a systematic clinical database registry that includes consensus endorsed quality measures’’ to the inpatient facility. We recognize that the NQF has endorsed this measure for the physician/clinician setting, but believe that this measure is highly relevant to the hospital setting, in that participation in a systematic clinical database registry for various topics is quite common in hospitals. Therefore, we previously adopted the Stroke and Nursing Sensitive Care registry participation measures as applications of the measure appropriate to the hospital inpatient setting. We reviewed the NQF’s consensus endorsed measures, as well as measures endorsed or adopted by other organizations, and were unable to identify any other measures specifically for participation in a systematic clinical database registry for general surgery that have been endorsed for the hospital inpatient setting. Having given due PO 00000 Frm 00153 Fmt 4701 Sfmt 4700 51627 consideration to other measures that have been endorsed or adopted by a consensus entity, we proposed to adopt an application of this non-NQF endorsed measure under the Secretary’s authority to select non-NQF endorsed measures where such measures do not exist for a specified topic or medical topic. We proposed to adopt the measure under the exception authority provided in section 1886(b)(3)(B)(IX)(bb) of the Act. Additionally, we believe that, for the same reasons, the previously adopted structural measures for Stroke and Nursing Sensitive Care registries also meet the requirements under this authority and proposed to continue collecting them on that basis. We proposed that annual data submission for this proposed structural measure via a Web-based collection tool would occur between April 1, 2013 and May 15, 2013 with respect to the time period January 1, 2012, through December 31, 2012. This collection period and time period were included in a correction notice to the FY 2012 IPPS/LTCH proposed rule published at (76 FR 34633). We believe that participation in a registry provides hospitals with valuable ongoing quality improvement information and demonstrates a commitment to improve. Many registries also collect outcome data and provide feedback to hospitals about their performance. We invited public comment on this proposal to include this structural measure for the FY 2014 payment determination. Comment: Some commenters did not support the adoption of the proposed structural measure because they believed that the measure is neither tightly linked to improving the quality of patient care, nor is it NQF-endorsed or adopted by the HQA. Response: This measure is an application of an NQF-endorsed measure for the hospital inpatient setting. We believe that structural measures are backbones to quality care as they assess whether infrastructure or conditions conducive to providing high quality care are present. Comment: Some commenters did not support the adoption of this structural measure because they believed that registry participation might create a false assumption among beneficiaries that the quality of a hospital can be judged by its participation or nonparticipation in the registry. The commenters also objected because they felt they would be required to participate in a registry and incur fees, and believed that registry participation should be voluntary. Furthermore, the E:\FR\FM\18AUR2.SGM 18AUR2 51628 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations commenters stated that the addition of another registry measure is not meaningful given CMS’ goal of establishing an EHR-based quality data reporting program by 2015. Response: We understand the commenters’ concerns. We want to clarify that the structural registry measure that we are finalizing does not require participation in any registry. To meet the reporting requirements for the structural measure, hospitals only have to answer yes or no to a question about whether they participate in a systematic clinical database registry for general surgery, and if so to indicate the registry. We do not believe adoption of Acute Myocardial Infarction (AMI) .. Heart Failure (HF) ........................... Pneumonia (PN) ............................. Surgical Care Improvement Project (SCIP). • • • • • • • • • • • • • • • • • • • • • • • • • • • AMI–1 Aspirin at arrival [SUSPENDED]. AMI–2 Aspirin prescribed at discharge. AMI–3 ACEI/ARB for left ventricular systolic dysfunction [SUSPENDED]. AMI–5 Beta-blocker prescribed at discharge [SUSPENDED]. AMI–7a Fibrinolytic (thrombolytic) agent received within 30 minutes of hospital arrival. AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI). AMI–10 Statin Prescribed at Discharge. HF–1 Discharge instructions. HF–2 Evaluation of left ventricular systolic function. HF–3 Angiotensin Converting Enzyme Inhibitor (ACE–I) or Angiotensin II Receptor Blocker (ARB) for left ventricular systolic dysfunction. PN–3b Blood culture performed in the emergency department prior to first antibiotic received in hospital. PN–6 Appropriate initial antibiotic selection. SCIP INF–1 Prophylactic antibiotic received within 1 hour prior to surgical incision. SCIP INF–2: Prophylactic antibiotic selection for surgical patients. SCIP INF–3 Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery). SCIP INF–4: Cardiac surgery patients with controlled 6AM postoperative serum glucose. SCIP INF–6 Appropriate Hair Removal [SUSPENDED]. SCIP INF–9: Postoperative urinary catheter removal on post operative day 1 or 2 with day of surgery being day zero. SCIP INF–10: Surgery patients with perioperative temperature management. SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to arrival who received a Beta Blocker during the perioperative period. SCIP INF—VTE-1: Surgery patients with recommended Venous Thromboembolism (VTE) prophylaxis ordered. SCIP–VTE-2: Surgery patients who received appropriate VTE prophylaxis within 24 hours pre/post surgery. Acute Myocardial Infarction (AMI) 30-day mortality rate. Heart Failure (HF) 30-day mortality rate. Pneumonia (PN) 30-day mortality rate. HCAHPS survey. Acute Myocardial Infarction 30-day Risk Standardized Readmission Measure. Heart Failure 30-day Risk Standardized Readmission Measure. Pneumonia 30-day Risk Standardized Readmission Measure. PSI 06: Iatrogenic pneumothorax, adult. PSI 11: Post Operative Respiratory Failure. PSI 12: Post Operative PE or DVT. PSI 14: Postoperative wound dehiscence. PSI 15: Accidental puncture or laceration. IQI 11: Abdominal aortic aneurysm (AAA) mortality rate (with or without volume). IQI 19: Hip fracture mortality rate. Complication/patient safety for selected indicators (composite). Mortality for selected medical conditions (composite). PSI 04 Death among surgical in patients with serious treatable complications. • • • • • • • 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. Participation in a Systematic Clinical Database Registry for General Surgery**. Central Line Associated Bloodstream Infection. Surgical Site Infection.* Catheter-Associated Urinary Tract Infection.** • • • • • • • • • • • • Mortality Measures (Medicare Patients). Patients’ Experience of Care .......... Readmission Measure (Medicare Patients). mstockstill on DSK4VPTVN1PROD with RULES2 AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs) and Composite Measures. AHRQ PSI and Nursing Sensitive Care. Structural measures ........................ Healthcare-Associated Infections ... 16:07 Aug 17, 2011 2014 payment determination: 1 HAI measure (CAUTI) collected through the NHSN, 1 claims-based measure (Medicare Spending Per Beneficiary), and 1 structural measure (Participation in a Systematic Clinical Database Registry for General Surgery). As a result, there will be a total of 59 measures in the FY 2014 Hospital IQR measure set, but we will only be collecting data on 55 of those measures for purposes of the FY 2014 payment determination. The 59 measures are listed below, and the 4 measures for which we will not be collecting data are designated with the word ‘‘SUSPENDED.’’ Hospital IQR program measures for FY 2014 payment determination reflecting retirement of 4 measures, suspension of data collection for 4 measures and adoption of 3 new measures Topic VerDate Mar<15>2010 a structural measure is incompatible with our goal to switch to EHR-based reporting by 2015, because many registries accept data from EHRs. After consideration of the public comments received, we are finalizing the proposed structural measure for FY 2014 payment determination. In summary, after consideration of the public comments received, we are finalizing the retirement of 4 measures from the FY 2014 measure set that was finalized in the FY 2011 IPPS/LTCH PPS final rule, suspending collection for 4 measures beginning with January 1, 2012 discharges, and adding 3 new measures to the measure set for the FY Jkt 223001 PO 00000 Frm 00154 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Hospital IQR program measures for FY 2014 payment determination reflecting retirement of 4 measures, suspension of data collection for 4 measures and adoption of 3 new measures Topic Hospital Acquired Condition Measures. Emergency Department Throughput • Foreign Object Retained After Surgery. • • • • • • • • • Prevention: Global Measures. 51629 Immunization Cost Efficiency ................................ • 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 Urinary Tract Infection (UTI). Manifestations of Poor Glycemic Control. ED–1 Median time from emergency department arrival to time of departure from the emergency room for patients admitted to the hospital.* ED–2 Median time from admit decision to time of departure from the emergency department for emergency department patients admitted to the inpatient status.* Immunization for Influenza.* • Immunization for Pneumonia.* • Medicare Spending per Beneficiary.** * Measures finalized in the FY 2011 IPPS/LTCH PPS final rule for the FY 2014 payment determination. ** Additional measures adopted in this final rule for FY 2014 payment determination. c. Hospital IQR Program Quality Measures for the FY 2015 Payment Determination (1) Retention of FY 2014 Payment Determination Measures for the FY 2015 Payment Determination We generally retain the Hospital IQR Program measures from one year to the next. Consistent with this approach, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25901), we proposed to retain all of the proposed measures for the FY 2014 payment determination, if finalized, for the FY 2015 payment determination. We did not receive any comments related to this proposal and are, therefore, finalizing it. (2) New Hospital IQR Program Measures for the FY 2015 Payment Determination mstockstill on DSK4VPTVN1PROD with RULES2 (A) New CDC/NHSN–Based HealthcareAssociated Infection (HAI) Measures for the 2015 Payment Determination In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25901 through 25903), for the FY 2015 payment determination, we proposed to adopt three additional HAI measures that are currently collected by CDC via the NHSN. These measures are: (1) Methicillin-resistant Staphylococcus Aureus (MRSA) Bacteremia measure; (2) Clostridium difficile (C. difficile) standardized infection ratio (SIR); and (3) Healthcare Personnel (HCP) Influenza Vaccination and the specifications for these measures are available at https://www.cdc.gov/nhsn/ PDFs/HSPmanual/HPS_Manual.pdf. Like the CLIP and the CAUTI measures that we proposed for the FY 2014 payment determination, all three proposed HAI measures are high VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 priority HAI measures listed in the HHS Action Plan to Prevent HAIs and were listed in previous rulemaking as possible quality measures for future payment determinations. Our review indicated that there are no measures for MRSA or C. difficile SIR that have been endorsed by the NQF or another consensus entity for the hospital inpatient setting. Therefore, we proposed to adopt these non-NQFendorsed measures under the Secretary’s authority to select non-NQF endorsed measures where such measures do not exist for a specified topic or medical topic. We proposed to adopt these two CDC-developed measures (MRSA and C. difficile SIR) under the exception authority provided in section 1886 (b)(3)(B)(IX)(bb) of the Act. The HCP Influenza Vaccination measure is NQF-endorsed (NQF #0431) for the hospital setting. Therefore, this measure meets the requirement for measure selection under section 1886(b)(3)(B)(viii)(IX)(aa) of the Act. The proposed reporting mechanism for these proposed HAI measures is discussed in greater detail in section IV.A.5.i. of the FY 2012 IPPS/LTCH PPS proposed rule. We invited public comment on these proposed HAI measures. Comment: One commenter applauded CMS’s proposed use of the measure exception authority under section 1886(b)(3)(B)(IX)(bb) of the Act to adopt the CDC-developed, non-NQF-endorsed MRSA and C. difficile SIR measures in the interest of public safety. The commenter believed that CMS’s proposal has met Congressional intent and takes into account the statutory requirements that govern the Hospital PO 00000 Frm 00155 Fmt 4701 Sfmt 4700 VBP Program, which mandate that measures be selected for that program on HAIs, as measured by the prevention metrics and targets established in the HHS Action Plan to Prevent HAIs. Response: We appreciate the commenter’s recognition of our efforts to adopt measures for the Hospital IQR Program to protect patient safety while fulfilling statutory mandates and promoting HHS initiatives. Comment: A commenter believed that the three proposed HAI measures for the FY 2015 payment determination need further refinement before they can be included in the Hospital IQR Program. Response: We thank the commenter for the comment. We will continue to collaborate with CDC to assure the specifications for the three proposed HAI measures are complete before the data collection period begins. Comment: Some commenters did not support the proposed MRSA and C. difficile SIR HAI measures because they are not NQF-endorsed. Response: Given the high priority of the MRSA and C. difficile SIR measures in the HHS Action Plan to Prevent HAIs, we proposed to implement these two measures to advance the goals of this initiative, despite of the lack of endorsement for the measures. As stated previously, we were unable to identify any other measures specifically for MRSA and C. Difficile SIR that have been NQF-endorsed for the hospital inpatient setting. We found no other measures that have been endorsed or adopted by a consensus entity. Therefore, we proposed to adopt these two non NQF-endorsed measures under the Secretary’s exception authority set out in section 1886(b)(3)(B)(IX)(bb) of the Act to select non-NQF endorsed E:\FR\FM\18AUR2.SGM 18AUR2 51630 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 measures where such measures do not exist for a specified area or medical topic. We have chosen to leverage the existing NHSN reporting system to collect HAI measures because we have already established a mechanism for reporting to the NHSN and it reduces potential hospital burden since many hospitals currently use the system. (1) Methicillin-Resistant Staphylococcus Aureus (MRSA) Bacteremia Measure There are different types of staphylococcus aureus bacteria, commonly called ‘‘staph.’’ Staph bacteria are normally found on the skin or in the nose. The bacteria are generally harmless unless they enter the body through a cut or other wound, and even then they usually cause only minor skin problems in healthy people. MRSA infection is caused by a strain of staph bacteria that has become resistant to the antibiotics commonly used to treat ordinary staph infections. Older adults with weakened immune systems and patients in hospital or nursing home settings are most vulnerable to MRSA infections. Health care-associated MRSA infections typically are associated with invasive procedures or devices, such as surgeries, intravenous tubing, urinary catheters, or artificial joints. MRSA infections account for about 60 percent of skin infections seen in United States emergency departments and invasive MRSA infections may cause about 18,000 deaths during a hospital stay a year.13 Currently, there are 6 States that require facilities to report MRSA information to NHSN. As stated above, we were unable to identify any other measures specifically for MRSA that have been endorsed by the NQF for the hospital inpatient setting. We found no other measures that have been endorsed or adopted by a consensus entity. Therefore, we proposed to adopt this non-NQF-endorsed and CDC-developed measure under the Secretary’s authority to select non-NQF-endorsed measures where such measures do not exist for a specified area or medical topic, under the exception authority provided in section 1886(b)(3)(B)(IX)(bb) of the Act. The proposed reporting mechanism for the MRSA measure is discussed in greater detail in section IV.A.5.i. of the FY 2012 IPPS/LTCH PPS proposed rule. We invited public comment on this proposed HAI measure. Comment: A commenter pointed out that the MRSA measure poses particular issues because it requires linkages 13 Catherine Liu, Arnold Bayer, et al., Clinical practice Guidelines by the for the treatment of Methicillin-Resistant Staphylococcus Aureus Infections in Adult and Children. Infectious Disease Society of America 2011; 52:e18 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 between laboratory data with admission-discharge-transfer systems. The commenter indicated that hospitals using this measure must manually enter the data. Therefore, the commenter recommended delaying the adoption of this measure until there is adequate vendor support for hospitals to manage the demands of reporting NHSN measures. Response: Like C. difficile laboratory identified events, MRSA bacteremia event data are a combination of laboratory results and admission/ discharge/transfer data. As with C. difficile laboratory event reporting, these two data types are often available electronically, and CDC expects that hospitals will increasingly use electronic data sources to report MRSA event data. According to CDC, users can enter the required LabID Event data either manually or electronically. Capacity to electronically link admission/discharge/ transfer and laboratory results data is not a prerequisite for reporting LabID event data to NHSN, but that capacity is a way to significantly improve efficiency and economy of reporting. CDC is already working with a number of vendors who are submitting LabID data via the CDC Clinical Document Architecture (CDA) import function and that number continues to grow. In addition, the monthly patient day and admission counts for an entire facility are often regularly tabulated for the facility for other administrative uses and so is more likely to be readily available compared to location specific monthly counts, which often require separate efforts to be tabulated within the facility’s data system. The denominator and laboratory data demands that are required for C. Difficile and MRSA Bacteremia have proven to be manageable among facilities who are already reporting at the facility-wide inpatient level in the States who have mandated such reporting. Facilities that do not use vendor CDA reporting, may still receive helpful lab printouts and reports to assist with identification of results that meet criteria for LabID Event reporting. The LabID form is short and requires only a limited number of variables, and the number of C. difficile and MRSA blood tests identified using the 14-day rule has shown to be within reasonable and manageable limits for currently participating facilities. If such numbers are very high for an entire facility, this may indicate the need for this important monitoring and surveillance to help guide appropriate facility infection control response. PO 00000 Frm 00156 Fmt 4701 Sfmt 4700 Comment: A commenter recommended that CMS allow hospitals to select two most applicable patient care units for purposes of reporting data on this proposed measure. The selected units should initially report a year of baseline data, followed by reporting data to CDC for no more than 6 months each year. Response: The MRSA bacteremia measure that we proposed and are finalizing in this final rule applies to patients hospital-wide, which is consistent with how the measure is presented in the HHS Action Plan to Prevent HAIs. We thank the commenter for the recommendation to allow hospitals to select two most applicable patient care units to report data on. However, allowing hospitals to choose two units could possibly skew the data and make it impossible to compare performance among hospitals. We found that monitoring at the location level and allowing facilities to choose their specific locations has not provided enough substantial data for meaningful nationwide comparative rates. This type of reporting was attempted in the CMS 9th SOW and showed that facilities tended to not choose locations with the highest rates and in need of further prevention efforts and also did not provide enough numbers by location type for reliable benchmarked, riskadjusted rates. After consideration of the public comments we received, we are finalizing the MRSA measure for the FY 2015 payment determination. (2) C. difficile SIR Measure Clostridium difficile (C. difficile) is a bacterium that can cause symptoms ranging from diarrhea, pseudomembranous colitis, and toxic megacolon to life-threatening sepsis and even death. Illness from C. difficile most commonly affects older adults in hospitals or in long term care facilities where germs spread easily, antibiotic use is common and people are especially vulnerable to infection. Illness from C. difficile typically occurs after use of antibiotic medications. C. difficile spreads mainly on hands from person to person, but also on commonly touched services such as cart handles, bedrails, bedside tables, toilets, sinks, stethoscopes, thermometers, and telephones. In recent years, C. difficile infections have become more frequent, more severe and more difficult to treat. Each year, tens of thousands of people in the United States get sick from C. difficile, including some otherwise healthy people who are not hospitalized or taking antibiotics. Healthcare providers E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations have become more aware of the C. difficile infection and therefore, more testing is being done for symptomatic patients. The C. difficile pathogens may require specialized monitoring to evaluate if intensified infection control efforts are required to reduce the occurrence of these organisms and related infections. Currently, there are 3 States that require facilities to report C. difficile data to NHSN. Our goal for this proposed C. difficile SIR measure is to provide a common mechanism (CDC/ NHSN) for all hospitals including hospitals participating in the Hospital IQR Program to report and analyze these data in order to inform infection control staff of the impact of targeted prevention efforts. The NHSN is listed in the HHS Action Plan to Prevent HAIs as the data source for HAI measures. Comment: Some commenters believed that the calculation of C. difficile SIRs will be challenging because hospitals use testing mechanisms with differing sensitivity to identify the presence of C. difficile. These commenters were concerned that the resulted difference in C. difficile SIR measurement may unfairly portray hospitals that use the more sensitive testing technology as having more C. difficile cases. A commenter pointed out that the C. difficile SIR measure poses particular issues because it requires linkages between laboratory data with admission-discharge-transfer systems. The commenter noted that currently, hospitals using this measure must manually enter the data. Therefore, the commenter recommended delaying the proposed adoption of this measure until there is adequate vendor support for hospitals to electronically interface with the NHSN for reporting. Response: CDC acknowledged that differences in the sensitivity of C. difficile laboratory testing methods could make a difference in the C. difficile event data that hospitals report. CDC is currently evaluating the impact and possible implications for C. difficile reporting through NHSN. C. difficile laboratory event data is a combination of laboratory results and admission/ discharge/transfer data. These two data types are often available electronically, and CDC expects that hospitals will increasingly use electronic data sources to report C. difficile event data. However, EHRs are not the only means of capturing such information. The same data can be abstracted from hospital reports and entered manually into NHSN. Therefore, there is not a dependence on electronic data capture, but there is an important opportunity to use electronic means to report, and waiting until widespread EHR adoption VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 would delay progress that could be made on these HAIs. Like MRSA Bacteremia, C. difficile facility-wide Lab-ID event reporting will be riskadjusted by hospital type, teaching and med affiliation, and bed size. In addition, NHSN has added a question on the required annual facility survey beginning with 2010 data that asks about the type of testing the lab conducts for C. difficile and this information will be used for additional risk-adjustment along with review of usability of admission on prevalence. Comment: One commenter requested clarification that the measure is only applicable to high-risk units and not hospital-wide. Response: The CDC measure of C. difficile listed in the HHS Action Plan to Prevent HAIs calls for hospital-wide measurement of C. difficile events. Because the risk of C. difficile extends throughout the hospital, the measure applies to all hospital C. difficile events, and this is part of the specifications for this measure. After consideration of the public comments we received, we are finalizing this measure for the FY 2015 payment determination. Data collection will begin with January 1, 2013 infection events. (3) Healthcare Personnel (HCP) Influenza Vaccination (NQF # 0431) For the FY 2015 payment determination, in the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25902 through 25903), we proposed to adopt one additional HAI measure that is currently collected by CDC via the NHSN: Healthcare Personnel (HCP) Influenza Vaccination (NQF # 0431). This measure assesses the percentage of HCP employed at the facility that received a prophylactic vaccination for influenza. This measure is NQFendorsed, and therefore, the measure meets the selection criteria under section 1886(b)(3)(B)(viii)(IX)(aa) of the Act. Rates of serious illness and death resulting from influenza and its complications are increased in high-risk populations such as persons over 50 years or under four years of age, and persons of any age who have underlying conditions that put them at an increased risk. HCP can acquire influenza from patients and can transmit influenza to patients and other HCP. Many HCP provide care for, or are in frequent contact with, patients with influenza or patients at high risk for complications of influenza. The involvement of HCP in PO 00000 Frm 00157 Fmt 4701 Sfmt 4700 51631 influenza transmission has been a longstanding concern.14 15 16 Vaccination is an effective preventive measure against influenza, and can prevent many illnesses, deaths, and losses in productivity.17 HCP are considered a high priority for expanding influenza vaccine use. Achieving and sustaining high influenza vaccination coverage among HCP is intended to help protect HCP and their patients and reduce disease burden and healthcare costs. Results of several studies indicate that higher vaccination coverage among HCP is associated with lower incidence of nosocomial influenza.18 19 20 Such findings have led some to call for mandatory influenza vaccination of HCP.21 22 23 24 25 Until recently, vaccination coverage among HCP has been well below the national Healthy People 2010 target of 14 Maltezou HC, Drancourt M., Nosocomial influenza in children. Journal of Hospital Infection 2003; 55:83–91. 15 Hurley JC, Flockhart S., An influenza outbreak in a regional residential facility. Journal of Infection Prevention 2010; 11:58–61. 16 Salgado CD, Farr BM, Hall KK, Hayden FG., Influenza in the acute hospital setting. The Lancet Infectious Diseases 2002; 2:145–155. 17 Wilde JA, McMillan JA, Serwint J, Butta J, O’Riordan MA, Steinhoff MC., Effectiveness of influenza vaccine in health care professionals: a randomized trial. The Journal of the American Medical Association 1999; 281:908–913. 18 Salgado CD, Giannetta ET, Hayden FG, Farr BM., Preventing influenza by improving the vaccine acceptance rate of clinicians. Infection Control and Hospital Epidemiology 2004; 25: 923–928. 19 Potter J, Stott DJ, Roberts MA, et al., Influenza vaccination of health-care workers in long-term-care hospitals reduces the mortality of elderly patients. Journal of Infectious Diseases 1997; 175:1–6. 20 Hayward AC, Harling R, Wetten S, et al., Effectiveness of an influenza vaccine programme for care home staff to prevent death, morbidity, and health service use among residents: cluster randomised controlled trial. British Medical Journal 2006; 333:1241–1246. 21 Talbot TR, Bradley SF, Cosgrove SE, et al., SHEA position paper: Influenza vaccination of healthcare workers and vaccine allocation for healthcare workers during vaccine shortages. Infection Control and Hospital Epidemiology 2005; 26:882–890 22 American College of Physicians (ACP), ACP policy on influenza vaccination of health care workers. https://www.acponline.org/running_ practice/quality_improvement/projects/adult_ immunization/flu_hcw.pdf 23 Greene LR, Cain TA, Dolan SA et al., APIC position paper: influenza immunization of healthcare personnel. Association of Professionals in Infection Control (APIC). November 2008. http: //www.apic.org/Content/NavigationMenu/Practice Guidance/Topics/Influenza/APIC_Position_Paper_ Influenza_11_7_08final_revised.pdf 24 National Patient Safety Foundation (NPSF), Mandatory flu vaccinations for healthcare workers. Press Release, November 18, 2009. https:// www.npsf.org/pr/pressrel/2009–11-18.php 25 Infectious Diseases Society of America (IDSA), IDSA policy on mandatory immunization of health care workers against seasonal and 2009 H1N1 influenza. Infectious Diseases Society of America (IDSA). September 30, 2009. https://www.idsociety. org/HCWimmunization/ E:\FR\FM\18AUR2.SGM 18AUR2 51632 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 60 percent,26 but preliminary data suggest 62 percent of HCP reported receiving seasonal influenza vaccine in 2009–2010.27 Only 37 percent reported receiving the 2009 pandemic A/H1N1 vaccine.28 HCP refers to all personnel working in healthcare settings who have the potential for exposure to patients and/ or to infectious materials, including body substances, contaminated medical supplies and equipment, contaminated environmental surfaces, or contaminated air.29 HCP may include (but are not limited to) physicians, nurses, nursing assistants, therapists, technicians, emergency medical service personnel, dental personnel, pharmacists, laboratory personnel, autopsy personnel, students and trainees, contractual staff not employed by the healthcare facility, and persons (for example, clerical, dietary, housekeeping, laundry, security, maintenance, billing, and volunteers) not directly involved in patient care but potentially exposed to infectious agents that can be transmitted to and from HCP and patients. Settings in which HCP may work include, but are not limited to, acute care hospitals, long-term care facilities, skilled nursing facilities, rehabilitation centers, physicians’ offices, urgent care centers, outpatient clinics, home health agencies, and emergency medical services. Currently, four States have ‘‘offer’’ laws for influenza vaccination of HCP, meaning that vaccine must be offered to HCP by healthcare facilities; and three States (Alabama, California, and New Hampshire) have ‘‘ensure’’ laws for influenza vaccination of HCP, meaning that vaccination of non-immune HCP is 26 Walker FJ, Singleton JA, Lu P, Wooten KG, Strikas RA., Influenza vaccination of healthcare workers in the United States, 1989–2002. Infection Control and Hospital Epidemiology 2006; 27:257– 265. 27 https://www.cdc.gov/mmwr/preview/ mmwrhtml/rr55e209a1.htm Influenza Vaccination of Health-Care Personnel. Recommendations of the Healthcare Infection Control Practices Advisory Committee (HICPAC) and the Advisory Committee on Immunization Practices. 28 Centers for Disease Control and Prevention., Interim results: Influenza A (H1N1) 2009 and Monovalent Seasonal Influenza Vaccination Coverage Among Health-Care Personnel—United States August 2009- January 2010. Morbidity and Mortality Weekly Report (MMWR); 59:357–362. Available at: https://www.cdc.gov/mmwr/preview/ mmwrhtml/mm5912a1.htm. 29 Adapted from: Pearson ML., Bridges CB., Harper SA.,: Influenza vaccination of health-care personnel: Recommendations of the Healthcare Infection Control Practices Advisory Committee (HICPAC) and the Advisory Committee on Immunization Practices (ACIP). Morbidity and Mortality Weekly Report (MMWR) 2006; 55:1–16. Available at: https://www.cdc.gov/mmwr/preview/ mmwrhtml/rr5502a1.htm. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 mandatory in the absence of a specified exemption or refusal; and, additionally, numerous hospitals and other healthcare facilities have established policies requiring mandatory influenza vaccination of their HCP.30 Currently, no State requires that hospitals report this measure to NHSN. However, approximately 13 hospitals (including long term acute care and rehabilitation), outpatient hemodialysis centers, long term care facilities, and ambulatory surgical centers are currently reporting HCP immunization data to NHSN. In September 2009, CDC released the Healthcare Personnel Safety (HPS) Component of NHSN, which complements Patient Safety and Biovigilance components available in NHSN. The HPS Component replaced CDC’s National Surveillance System for Health Care Workers (NaSH) and is comprised of two modules: the Blood/ Body Fluid Exposure Module and the Influenza Vaccination and Management and Exposure Module.31 Currently, participation in either module is voluntary. The current Influenza Vaccination and Management and Exposure Module may soon offer options for healthcare facilities to submit vaccination summary data. NHSN plans to partner with vendorbased surveillance systems to permit periodic data extractions into NHSN. The modules feature basic, custom, and advanced analysis capabilities available in real-time, which allow individual healthcare facilities to compile and analyze their own data, as well as benchmark these results to aggregate NHSN estimates. The HPS Component can assist participating facilities in developing surveillance and analysis capabilities to permit the timely recognition of HCP safety problems and prompt interventions with appropriate measures. Influenza vaccination data submitted to CDC will ultimately capture regional trends on the yearly uptake of the vaccine, prophylaxis and treatment for healthcare personnel, as well as the elements within yearly influenza campaigns that succeed or require improvement. At the State and national levels, the HPS Component will aid in monitoring rates and trends. We proposed to adopt the Healthcare Provider Influenza Vaccination measure that is currently collected by the CDC via the NHSN because of its importance in preventing influenza not only among 30 For additional information regarding healthcare facilities’ influenza vaccine policies, please see: https://www.immunize.org/honor%2Droll/. 31 Available at: https://www.cdc.gov/nhsn/ hps.html. PO 00000 Frm 00158 Fmt 4701 Sfmt 4700 healthcare workers but also among the patients that they attend. As stated earlier, this measure assesses the percent of Healthcare Personnel employed at the facility that received a prophylactic vaccination for influenza. Detailed specifications for the proposed measure are available at: https:// www.cdc.gov/nhsn/PDFs/HSPmanual/ HPS_Manual.pdf. As we also stated above, this measure is NQF-endorsed for the hospital setting. The proposed reporting mechanism for this proposed HAI measure is discussed in greater detail in section IV.A.5.i. of the FY 2012 IPPS/LTCH PPS proposed rule. We invited public comment on this proposed HAI measure. Comment: Many commenters fully supported the proposed measure and stated that the measure will promote efforts in improving hospitals influenza vaccination rates and patient safety. Some commenters urged CMS to adopt this measure for the FY 2014 payment determination. Commenters recommended additional measures for other vaccines that prevent highly communicable diseases, such as pertussis, and diseases such as hepatitis B. A commenter strongly supported the adoption of this measure for the Hospital VBP Program. Finally, a commenter recommended that CMS adopt an adult immunization composite measure that is endorsed by NQF. Response: We thank the commenters for their recognition of the significance of this measure and for their strong support of the measure. Because the measure is scheduled to undergo NQF maintenance, we proposed to begin collection of the measure for the Hospital IQR Program in 2013 (FY 2015 payment determination) rather than 2012 (FY 2014 payment determination) as suggested by the commenter in order to ensure that necessary revisions to the specifications are in place before the start of collection. We will consider the commenters’ suggestions for additional measure topics as we select future measures. Comment: Many commenters supported the public reporting of this proposed measure. However, a commenter was concerned that the collection of data via NHSN is redundant and labor intensive because the current specifications of the NHSN system require hospitals to submit detailed data on every employee, rather than aggregated data on vaccination rates. Some commenters believed that most hospitals already have a database to track employee vaccination status. The commenters recommended that CMS either identify an alternative NQFendorsed measure or postpone the E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 adoption of the measure in the Hospital IQR Program until the CDC has completed and fully tested the summary data collection tool. A few commenters suggested delaying the proposed measure until data can be collected via EHRs. A few commenters believed that current NQF-endorsed measures specifying the reporting of the vaccination status of all healthcare personnel are too labor-intensive. Commenters recommended that CMS either adopt a simplified definition of the measure that focuses solely on hospital employees and excludes contracted staff, or allow hospitals to submit summary data on HCP rates, ideally from existing databases, to reduce burden. Commenters also suggested that CMS allow for external factors outside of the facilities control (for example, vaccination shortage). Response: The measure is currently being respecified by the CDC to eliminate unnecessary burden on hospitals. CDC will be adding aggregate reporting of healthcare personnel influenza vaccination coverage to NHSN and has submitted a proposed measure to NQF that uses aggregate reporting in the measure proposal. The scope of the proposed respecified measure is hospital employees and credentialed non-employees. These steps will enable hospitals—and other healthcare facilities—to take advantage of aggregate reporting capacity that is built into occupational health information systems. We are confident that such revisions to the measure specifications will be fully implementable by the proposed FY 2015 payment determination. This is a change to how the measure is reported to NHSN (reporting on the influenza vaccination coverage of at the facility level, rather than for individual personnel at the facility, and is not a change in the substance of the measure itself). After consideration of the public comments received, we are finalizing the HCP Influenza Vaccination measure for the FY 2015 payment determination. Required data collection for the FY 2015 payment determination will cover the period from January 1, 2013 through March 31, 2013. For future payment determinations, data collection will cover the period from October 1 through March 31st to coincide with the flu season. (B) New Chart-Abstracted Measures for the FY 2015 Payment Determination In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25903 through 25907), we proposed to adopt two sets of chart-abstracted measures for the FY 2015 payment determination: the Stroke VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 and Venous Thromboembolism (VTE) measure sets. All of these proposed measures have either previously been proposed for the Hospital IQR Program, or have been listed as being under consideration for future adoption into the program. In addition, with one exception (STK–1: VTE Prophylaxis), all of the measures in these two measure sets have been electronically specified and are among the measures adopted for the EHR Incentive Program for eligible hospitals. While we proposed to adopt these for chart-abstracted submission in 2013 for the FY 2015 payment determination, we believe that by a future date, such as 2015, hospitals will be able to switch to EHR-based submission of these and all other chartabstracted measures submitted for the Hospital IQR Program, and, as we discuss in greater detail below, we intend to work toward this goal over the next few years. The Stroke measure set we proposed to adopt consists of 8 measures; and the VTE measure set consists of 6 measures. Both measure sets are NQF-endorsed and their specifications are currently available in the Specifications Manual, which can be found on QualityNet. We believe that both of the proposed measure sets compliment the data elements in our current SCIP VTE and AMI measure sets. Comment: Many commenters supported the adoption of the Stroke measure set and the VTE measure set into the Hospital IQR Program because the measures in the sets are NQFendorsed and HQA-adopted, and they are used by The Joint Commission as core measure sets. Commenters believed that the measures will provide meaningful information regarding how well Stroke care and VTE care are being managed in a hospital setting. The commenters further noted that the measure sets are already e-specified for the meaningful use criteria under the EHR Incentive Program. The commenters recommended delaying the adoption of the measure sets until there is harmonization of the measure sets for both the EHR Incentive Program and the Hospital IQR Program, so that the reporting burden would be significantly reduced for hospitals. Some commenters disagreed with CMS’ assertion that the addition of measures will align the Hospital IQR Program with the EHR Incentive Program because the Stroke measure set and the VTE measure set calculations derived from chart-based measure specifications are not the same as those derived from e-measure specifications. The commenters believed that any discrepancy in calculation of PO 00000 Frm 00159 Fmt 4701 Sfmt 4700 51633 performance rates may lead to confusion when they are publicly reported. Commenters recommended comparison of data collected through manual abstraction and EHR-based reporting to resolve discrepancies in calculations prior to display on Hospital Compare. Response: We thank the commenters for their support of the Stroke measure set and the VTE measure set. Providing hospitals with one set of harmonized specifications is a key goal for CMS for the future. We are aware of the differences in the chart-abstracted and EHR e-measure specifications, and have been working with relevant stakeholders to remedy the situation. We also recognize that many hospitals participating in the Hospital IQR Program have not adopted EHR technology at this time. Therefore, we are finalizing our proposal to include the chart-abstracted Stroke and VTE measure sets for data collection beginning with January 1, 2013 discharges. We also thank the commenters for their recommendations. We plan to update the Specifications Manual’s chart-abstracted specifications for the stroke clinical quality measure set in order to align with the electronic specifications for these measures. As we move towards alignment and harmonization of clinical quality measures reporting among federal reporting initiatives, we plan to compare, test, and align these reporting specifications using different data sources. (i) Stroke Measure Set Stroke is a topic of great relevance to the Medicare population due to its impact on morbidity and mortality, and it is an area with great potential for quality improvement for hospitals caring for stroke patients. Stroke is the third most common cause of death in the United States and is one of the top 20 conditions contributing to Medicare costs. Approximately 8 to 12 percent of ischemic strokes are fatal,32 and mortality following stroke is influenced by the quality of care provided to patients during their initial hospitalization.33 In the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR 43873), we listed 8 Stroke measures as being under consideration for adoption for the FY 2012 Hospital IQR payment determination. Numerous commenters encouraged us to adopt the listed stroke 32 American Heart Association, Heart Disease and Stroke Statistics—2009 Update. American Heart Association, 2009: p. 1–36. 33 Weir, N.U., et al., Variations between countries in outcome after stroke in the International Stroke Trial (IST). Stroke, 2001. 32(6): p. 1370–7. E:\FR\FM\18AUR2.SGM 18AUR2 51634 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations measures which they see as evidencebased measures that accurately measure the care of the stroke patient (74 FR 43875 through 43876). Commenters believed that the measures are widely recognized for their roles in minimizing secondary strokes and other complications. We proposed to adopt a stroke measure set with 8 NQF-endorsed process of care measures for the FY 2015 payment determination. The table below lists and describes each of these eight proposed measures. 8 PROPOSED STROKE MEASURES STK–1: Venous Thromboembolism (VTE) Prophylaxis for patients with ischemic or hemorrhagic stroke. (NQF #0434). STK–2: Ischemic stroke patients discharged on antithrombotic therapy. (NQF #0435). STK–3: Anticoagulation therapy for atrial fibrillation/flutter. (NQF #0436). STK–4: Thrombolytic Therapy for Acute ischemic stroke patients. (NQF #0437). STK–5: Antithrombotic therapy by the end of hospital day two. (NQF #0438). STK–6: Discharged on statin medication. (NQF #0439) .............. STK–8: Stroke education. (NQF #0440) ...................................... mstockstill on DSK4VPTVN1PROD with RULES2 STK–10: Assessed for rehabilitation services. (NQF #0441) ...... Because the NQF is the entity that holds a contract with the Secretary under section 1890(a) of the Act, measures that are endorsed by the NQF meet the requirement for measure selection under section 1886(b)(3)(B)(viii)(IX)(aa) of the Act. Aside from the consideration of NQF endorsement, we believe that the inclusion of the proposed stroke measure set in the Hospital IQR Program would provide a comprehensive view of how well stroke care is being managed in a hospital setting. As stated earlier, detailed measure specifications for these 8 proposed measures are available in the Specifications Manual located in QualityNet. We invited public comment on the proposed stroke measure set. Comment: A commenter stated that there are errors in the e-specifications of the Stroke measure set and requested corrections of the errors to avoid variability of rates caused by discrepancy in measure specifications. Response: We have received public comments identifying a number of issues and questions about the electronic specifications for the Stroke related HITSP measure specifications listed in TN906/v1.0. We are working with the measure steward to make updates to these electronic specifications and will notify the public when the updates are published. In the future, we anticipate that electronic specification review will be part of the NQF measure endorsement process. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Percent of patients with an ischemic stroke or a hemorrhagic stroke and who are non-ambulatory should start receiving DVT prophylaxis by end of hospital day two. Percent of patients with an ischemic stroke prescribed antithrombotic therapy at discharge. Percent of patients with an ischemic stroke with atrial fibrillation discharged on anticoagulation therapy. Percent of acute ischemic stroke patients who arrive at the hospital within 120 minutes (2 hours) of time last known well and for whom IV t-PA was initiated at this hospital within 180 minutes (3 hours) of time last known well. Percent of patients with ischemic stroke who receive antithrombotic therapy by the end of hospital day two. Percent of 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. Percent of patients with ischemic or hemorrhagic stroke or their caregivers who were given education or educational materials during the hospital stay addressing all of the following: personal risk factors for stroke, warning signs for stroke, activation of emergency. Percent of patients with an ischemic stroke or hemorrhagic stroke who were assessed for rehabilitation services. After consideration of the public comments we received, we are finalizing the Stroke measure set for the FY 2015 payment determination. (ii) VTE Measure Set It is widely agreed that VTE is the number one preventable cause of hospital death in the United States and the cost of VTE when it occurs is very high. A recent study from AHRQ in Health Affairs highlighted that when an acute VTE event occurs, it increases the costs of care by 25 percent. In 2008, the Surgeon General issued a Call to Action to Prevent Deep Vein Thrombosis and Pulmonary Embolism. (This document can be found at: https://www.surgeon general.gov/topics/deepvein/callto action/call-to-action-on-dvt-2008.pdf.) VTE prevention with pharmacologic agents can impact the cost effectiveness of care. Specifically, patients who received anti-coagulant medication during hospitalization have less likelihood of recurrence of VTEs upon discharge to home. Parenteral anticoagulation is the first line of therapy because of its rapid onset of action. Because the oral anticoagulant medication has a very slow onset of action, it cannot be used as monotherapy for acute VTE. A minimum of 5 days of parenteral anticoagulation is recommended as ‘‘overlap therapy’’ while oral anticoagulant medication is being initiated. More thrombotic complications and higher costs are associated with treatment in patients PO 00000 Frm 00160 Fmt 4701 Sfmt 4700 demonstrating a subtherapeutic aPTT. Unfractionated Heparin (UFH) Dosages/ Platelet Count Monitoring by Protocol (or Nomogram) has significantly advanced the use of UFH with the demonstrated ability to achieve therapeutic aPTTs more rapidly than with standard UFH dosing. When this occurs, patients can be discharged sooner. However, anticoagulation therapy poses risks to patients and often leads to adverse drug events due to complex dosing, requisite follow-up monitoring and inconsistent patient compliance. The use of standardized practices for anticoagulation therapy that includes patient/caregiver involvement may reduce the risk of adverse drug events. The Hospital IQR Program currently has 2 measures of VTE prophylaxis for surgical patients (SCIP–VTE–1: Venous thromboembolism (VTE) prophylaxis ordered for surgery patients; and SCIP– VTE–2: VTE prophylaxis within 24 hours pre/post surgery) in the SCIP measure set. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43873), we listed 5 VTE measures (VTE– 1: Venous thromboembolism prophylaxis; VTE–3: Venous thromboembolism patients with anticoagulation overlap therapy; VTE–4: Venous thromboembolism patients receiving unfractionated heparin with dosages/platelet count monitoring by protocol; VTE–5: Venous thromboembolism discharge instructions; and VTE–6: Incidence of E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations potentially-preventable venous Thromboembolism) as possible new measures for the FY 2012 payment determination. In the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50213 through 50218), we listed 6 VTE measures (VTE–1: Venous thromboembolism prophylaxis; VTE–2: Intensive care unit venous thromboembolism prophylaxis; VTE–3: Venous thromboembolism patients with anticoagulation overlap therapy; VTE–4: Venous thromboembolism patients receiving unfractionated heparin with dosages/platelet count monitoring by protocol; VTE–5: Venous thromboembolism discharge instructions; and VTE–6: Incidence of potentially-preventable venous thromboembolism) as measures we were 51635 considering for possible future adoption into the program. We proposed to adopt for the FY 2015 Hospital IQR measure set 6 VTE measures which are aimed at preventing the incidence of potentially preventable VTE. These 6 measures are listed and described below. 6 PROPOSED VENOUS THROMBOEMBOLISM (VTE) MEASURES VTE–1: Venous thromboembolism prophylaxis (NQF #0371). VTE–2: Intensive care unit venous thromboembolism prophylaxis (NQF #0372). VTE–3: Venous thromboembolism patients with anticoagulation overlap therapy (NQF #0373). VTE–4: Venous thromboembolism patients receiving unfractionated heparin with dosages/platelet count monitoring by protocol (NQF #0374). VTE–5: Venous thromboembolism discharge instructions (NQF #0375). mstockstill on DSK4VPTVN1PROD with RULES2 VTE–6: Incidence of potentially-preventable venous Thromboembolism (NQF #0376). Percent of patients who received VTE prophylaxis or have documentation why no VTE prophylaxis was given the day of or the day after hospital admission or surgery end date for surgeries that start the day of or the day after hospital admission. Percent of patients who received VTE prophylaxis or have documentation why no VTE prophylaxis was given the day of or the day after the initial admission (or transfer) to the Intensive Care Unit (ICU) or surgery end date for surgeries that start the day of or the day after ICU admission (or transfer). Percent of patients diagnosed with confirmed VTE who received an overlap of parenteral (intravenous [IV] or subcutaneous [subcu]) anticoagulation and warfarin therapy. For patients who received less than 5 days of overlap therapy, they must be discharged on both medications. Overlap therapy must be administered for at least 5 days with an international normalized ratio (INR) = 2 prior to discontinuation of the parenteral anticoagulation therapy or the patient must be discharged on both medications. Percent of patients diagnosed with confirmed VTE who received intravenous (IV) UFH therapy dosages AND had their platelet counts monitored using defined parameters such as a nomogram or protocol. Percent of patients diagnosed with confirmed VTE that are discharged to home, to home with home health or home hospice on warfarin with written discharge instructions that address all four criteria: Compliance issues, dietary advice, follow-up monitoring, and information about the potential for adverse drug reactions/interactions. Percent of patients diagnosed with confirmed VTE during hospitalization (not present on arrival) who did not receive VTE prophylaxis between hospital admission and the day before the VTE diagnostic testing order date. These 6 measures were endorsed in a 2008 NQF project titled: National Voluntary Consensus Standards for Prevention and Care of Venous Thromboembolism: Additional Performance Measures. Because the NQF is the entity that holds a contract with the Secretary under section 1890(a) of the Act, measures that are endorsed by the NQF meet the requirement for measure selection under section 1886(b)(3)(B)(viii)(IX)(aa) of the Act. Aside from the consideration of NQFendorsement, we believe that the inclusion of the VTE measure set in the Hospital IQR Program would provide a comprehensive view of how well VTE care is being managed in a hospital setting. Detailed measure specifications for these 6 proposed measures are available in the Specifications Manual located on QualityNet. We invited public comment on the proposed VTE measure set. Comment: One commenter supported the adoption of VTE 1, VTE 2, and VTE 3 but noted that the excluded populations in the denominator of the measures need to be expanded so that the compliance rates can be better portrayed. One commenter opposed the adoption of VTE 4 and VTE 5 because VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 the commenter believed that the level of detail being reported does not meet the objectives of the Hospital IQR Program. Further, the commenter recommended that VTE 6 not be adopted because the commenter believed that the definition is not consistent with epidemiological principles. Response: VTE is a condition that can be reasonably prevented by following evidence based guidelines, which are the basis for the VTE measure set. We believe including this VTE measure set will encourage broad use of VTE prophylaxis in both medical and surgical patients. VTE 1, VTE 2, and VTE 3 address appropriate preventive treatment for surgical patients, patients in the ICU, and patients on anticoagulants. VTE 4 and VTE 5 assess important factors in VTE prophylaxis. VTE 4 seeks to encourage hospitals to use a standardized tool for the titration of VTE prophylactic agents to achieve appropriate levels of effectiveness. The use of a nomogram or standardized protocol may reduce the incidence of adverse events related to nontherapeutic blood levels. VTE 5 is a measure of patient education related to VTE and prophylaxis including follow up care, dietary restrictions, and adverse PO 00000 Frm 00161 Fmt 4701 Sfmt 4700 interactions. VTE 6 is an important measure of the incidence of VTE in the hospitalized patient. Therefore, we are finalizing the adoption of the VTE measure set for discharges beginning on or after January 1, 2013. Comment: One commenter urged CMS to separately report on Hospital Compare measure rates calculated using e-specifications and measure rates calculated using chart-abstracted data. Response: We thank the commenter for the suggestion. Currently the especifications are not used for Hospital IQR, but are used for Medicare EHR Incentive Programs. We currently do not post measure rates for Medicare EHR Incentive Programs on the Hospital Compare Web site. We will continue to post measure data collected as part of the Hospital IQR and Hospital VBP Programs on the Hospital Compare Web site. Comment: One commenter stated that the reporting of 76 measures by FY 2015 is a resource and data burden for hospitals. Response: We anticipate that once hospitals have acquired the capability to submit data on measures electronically in a future date such as 2015, the burden will be reduced significantly. E:\FR\FM\18AUR2.SGM 18AUR2 51636 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations After consideration of the public comments we received, we are finalizing the proposed VTE measure set for the FY 2015 payment determination. Data collection will begin with discharges on or after January 1, 2013. In summary, after consideration of the public comments received, we are finalizing the retention of 59 measures for the FY 2014 measure set, and adding 17 new measures to the measure set for the FY 2014 payment determination: 3 HAI measures collected through the NHSN, (MRSA Bacteremia, C. difficile SIR, and the Healthcare Personnel Influenza Vaccination), the Stroke measure set (8 measures) and the VTE measure set (6 measures). As a result, Topic Hospital IQR program measures for FY 2015 payment determination Acute Myocardial Infarction (AMI) Measures. Heart Failure (HF) Measures .......... Stroke Measure Set ........................ VTE Measure Set ........................... Pneumonia (PN) Measures ............ Surgical Care Improvement Project (SCIP) Measures. • • • • • • • • • • • • • • AMI–1 Aspirin at arrival [SUSPENDED]. AMI–2 Aspirin prescribed at discharge. AMI–3 ACEI/ARB for left ventricular systolic dysfunction [SUSPENDED]. AMI–5 Beta-blocker prescribed at discharge [SUSPENDED]. AMI–7a Fibrinolytic (thrombolytic) agent received within 30 minutes of hospital arrival. AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI). AMI–10 Statin Prescribed at Discharge. HF–1 Discharge instructions. HF–2 Evaluation of left ventricular systolic function. HF–3 Angiotensin Converting Enzyme Inhibitor (ACE–I) or Angiotensin II Receptor Blocker (ARB) for left ventricular systolic dysfunction. STK–1 VTE prophylaxis.** STK–2 Antithrombotic therapy for ischemic stroke.** STK–3 Anticoagulation therapy for Afib/flutter.** STK–4 Thrombolytic therapy for acute ischemic stroke.** STK–5 Antithrombotic therapy by the end of hospital day.** STK–6 Discharged on Statin.** STK–8 Stroke education.** STK–10 Assessed for rehab.** VTE–1 VTE prophylaxis.** VTE–2 ICU VTE prophylaxis.** VTE–3 VTE patients with anticoagulation overlap therapy.** VTE–4 Patients receiving un-fractionated Heparin with doses/labs monitored by protocol.** VTE–5 VTE discharge instructions.** VTE–6 Incidence of potentially preventable VTE.** PN–3b Blood culture performed in the emergency department prior to first antibiotic received in hospital. PN–6 Appropriate initial antibiotic selection. SCIP INF–1: Prophylactic antibiotic received within 1 hour prior to surgical incision. SCIP INF–2: Prophylactic antibiotic selection for surgical patients. SCIP INF–3: Prophylactic antibiotics discontinued within 24 hours after surgery end time (48 hours for cardiac surgery). SCIP INF–4: Cardiac surgery patients with controlled 6AM postoperative serum glucose. SCIP INF–6: Appropriate Hair Removal [SUSPENDED]. SCIP INF–9: Postoperative urinary catheter removal on post operative day 1 or 2 with day of surgery being day zero. SCIP INF–10: Surgery patients with perioperative temperature management. SCIP Cardiovascular-2: Surgery Patients on a Beta Blocker prior to arrival who received a Beta Blocker during the perioperative period. SCIP INF–VTE-1: Surgery patients with recommended Venous Thromboembolism (VTE) prophylaxis ordered. SCIP–VTE-2: Surgery patients who received appropriate VTE prophylaxis within 24 hours pre/post surgery. Acute Myocardial Infarction (AMI) 30-day mortality rate. Heart Failure (HF) 30-day mortality rate. Pneumonia (PN) 30-day mortality rate. HCAHPS survey. • • • • • • • • • • • • • Acute Myocardial Infarction 30-day Risk Standardized Readmission Measure. Heart Failure 30-day Risk Standardized Readmission Measure. Pneumonia 30-day Risk Standardized Readmission Measure. PSI 06: Iatrogenic pneumothorax, adult. PSI 11: Post Operative Respiratory Failure. PSI 12: Post Operative PE or DVT. PSI 14: Postoperative wound dehiscence. PSI 15: Accidental puncture or laceration. IQI 11: Abdominal aortic aneurysm (AAA) mortality rate (with or without volume). IQI 19: Hip fracture mortality rate. Complication/patient safety for selected indicators (composite). Mortality for selected medical conditions (composite). PSI–4 Death among surgical inpatients with serious treatable complications. • • • • • • • • • • • • • • • • • • • • • • • • • • Mortality Measures (Medicare Patients). Patients’ Experience of Care Measure. Readmission Measures (Medicare Patients). mstockstill on DSK4VPTVN1PROD with RULES2 AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs) and Composite Measures. AHRQ PSI and Nursing Sensitive Care. Structural Measures ........................ VerDate Mar<15>2010 16:07 Aug 17, 2011 there will be a total of 76 measures in the FY 2015 Hospital IQR measure set, but we will only be collecting data on 72 of those measures for purposes of the FY 2015 payment determination. The 76 measures are listed below, and the 4 measures for which we will not be collecting data are designated with the word ‘‘SUSPENDED.’’ • Participation in a Systematic Database for Cardiac Surgery. • Participation in a Systematic Clinical Database Registry for Stroke Care. Jkt 223001 PO 00000 Frm 00162 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Topic Healthcare-Associated Measures. 51637 Hospital IQR program measures for FY 2015 payment determination Infections Hospital Acquired Condition Measures. Emergency Department Throughput Measures. Prevention: Global Immunization Measures. Cost Efficiency ................................ • • • • • • • • • • • • • • • • • • • • • Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care. Participation in a Systematic Clinical Database Registry for General Surgery.* Central Line Associated Bloodstream Infection. Surgical Site Infection. Catheter-Associated Urinary Tract Infection.* MRSA Bacteremia.** Clostridium difficile (C. difficile).** Healthcare Provider Influenza Vaccination.** 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 Urinary Tract Infection (UTI). Manifestations of Poor Glycemic Control. ED–1 Median time from emergency department arrival to time of departure from the emergency room for patients admitted to the hospital. ED–2 Median time from admit decision to time of departure from the emergency department for emergency department patients admitted to the inpatient status. Immunization for Influenza. Immunization for Pneumonia. Medicare Spending per Beneficiary.* * New quality measures for the FY 2014 payment determination. ** New quality measures for FY 2015 payment determination. 4. Possible New Quality Measures and Measure Topics for Future Years We anticipate that as EHR technology evolves, and more infrastructure is put in place, we will have the capacity to accept electronic reporting of all of the clinical chart-abstracted measures that are currently part of the Hospital IQR Program or have been proposed for adoption into the program. We intend for this future progress to significantly reduce the administrative burden on hospitals under the Hospital IQR Program. We recognize that considerable work needs to be done by measure owners and developers to make this possible with respect to the clinical quality measures that we proposed. This includes completing electronic specifications for measures, pilot testing, reliability, and validity testing, and implementing such specifications into EHR technology to capture and calculate the results, and implementing the systems. We believe that at a future date, such as 2015, CMS and hospitals will be able to switch to complete EHRbased reporting of all chart-abstracted measures to CMS for the Hospital IQR Program, and we intend to work diligently toward this goal. We believe this will simplify measure collection and submission for the Hospital IQR Program, and will reduce the burden on hospitals. We invited public comment and suggestions on this topic. In future rules, it is our intention to propose to adopt outcome measures for stroke and joint replacement surgery which we have developed and anticipate submitting for NQF review. In addition, we intend to propose additional HAI measures as they gain NQF endorsement. We also invited public comment on the following quality measures and topics set out below that we are considering for the future. We seek to limit the number of chart-abstracted measures and topics in the near future, in order to facilitate the transition to EHR-based reporting. POSSIBLE HOSPITAL IQR PROGRAM FUTURE MEASURES AND TOPICS Measurement topic Measure title/description/concept Mortality/Complications ..................................... Readmissions ................................................... Patient Safety ................................................... Medication Safety ............................................. mstockstill on DSK4VPTVN1PROD with RULES2 Surgical Outcome Measures ............................ Healthcare-Associated Infections ..................... Readmissions ................................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 • • • • • • • • • • • • • • • • • • • • Acute stroke 30-day mortality rate. Total Hip and Total Knee arthroplasty 30-day complications. Stroke 30-Day Risk Standardized Readmission Measure. Total Hip and Total Knee Arthroplasty 30-Day Risk Standardized Readmission Measure. Surgical checklist use for surgical procedures. NQF approved Serious Reportable Events. Universal Documentation and Verification of Current Medications in the Medical Record. Drug-Drug interaction. Medication Reconciliation. Lower Extremity Bypass Complications. ICD Complications. Risk Adjusted Case Mix Adjusted Elderly surgery outcomes. Risk Adjusted Case Mix Adjusted Colorectal surgery outcomes. Ventilator Associated Pneumonia. Post Procedure Pneumonias. Multi Drug Resistant Organisms—VRE, Klebsiella, Acinetobacter. COPD 30-day Risk Standardized Readmission Rate. CABG 30-day Risk Standardized Readmission Rate. Other Vascular Condition 30-day Risk Standardized Readmission. Percutaneous Coronary Intervention (PCI) 30-day Risk Standardized Readmission Rate. PO 00000 Frm 00163 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 51638 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations POSSIBLE HOSPITAL IQR PROGRAM FUTURE MEASURES AND TOPICS—Continued Measurement topic Measure title/description/concept Average Length of Stay .................................... Mortality ............................................................ SCIP ................................................................. Care Coordination ............................................ Heart Failure ..................................................... Tobacco & Alcohol Cessation .......................... Nursing Sensitive (remainder of measures) ..... mstockstill on DSK4VPTVN1PROD with RULES2 Cardiac Surgery measures ............................... Comment: Commenters generally supported CMS adopting more outcome measures in the future. The commenters further stated that CMS should not dismiss process of care measures that have a direct link to outcome measures. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 • All-Patient Condition-Specific Readmission Rates for AMI, Heart Failure, Pneumonia, CABG, COPD, PCI, other vascular conditions. • All-condition 30-day readmission rate. • Overall inpatient hospital average length of stay (ALOS) and ALOS by medical service category. • 30-day Risk Standardized Mortality Rate following PCI for STEMI/shock patients. • 30-day risk-standardized mortality rate following PCI for non-STEMI/non-shock patients. • Short Half-Life prophylactic administered preoperatively redosed within 4 hours after preoperative dose. • Cardiac Rehabilitation Referral for AMI, HF, Cardiac Surgery. • Symptom and Activity Assessment. • Symptom Management. • Patient Education. • Combination Medical Therapy for LVSD. • Beta Blocker Therapy for LVSD. • Counseling Regarding ICD for Patients with LVSD. • TAM–1: Tobacco Use Screening. • TAM–2: Tobacco Use Treatment. • TAM–3: Tobacco Use Treatment Management at Discharge. • TAM–4: Assessing Status after Discharge. • TAM–5: Alcohol Use Screening. • TAM–6: Alcohol Use Brief Intervention. • TAM–7: Alcohol and other Drug dependence—Treatment Management at Discharge. • TAM–8: Substance Use—Assessing Status after Discharge. • NSC–2: Patients surveyed on an eligible reporting unit that have at least one stage II or greater [National Ulcer Advisory Panel (NPUAP)] nosocomial pressure ulcer on the day of the prevalence study. • NSC–3: Number of patient falls, with or without injury to the patient, by type of Unit during the calendar month × 1000. • NSC–4: Number of patient falls with an injury level of minor or greater by Type of Unit during the calendar month × 1,000. • NSC–5: Patients surveyed on the eligible reporting unit that have a vest restraint and/or limb restraint (upper or lower or both) on the day of the prevalence study. • NSC–12: Number of productive hours worked as specified in the Set Measure Identifier. • NSC–13: Total number of productive hours worked by nursing staff (stratified by type of certification RN, LPN/LVN, UAP) with direct patient care responsibilities by Type of Unit during the calendar month. • NSC–14: Nursing satisfaction survey. • NSC 15: The total number of voluntary separations (as specified under the Performance Measure Identifier and Description above) during the calendar month. • Post-operative Renal Failure. • Surgical Re-exploration. • Anti-Platelet Medication at Discharge. • Beta Blockade at Discharge. • Anti-Lipid Treatment Discharge (Statin at Discharge). • Risk-Adjusted Operative Mortality for CABG. • Risk-Adjusted Operative Mortality for Aortic Valve Replacement (AVR). • Risk-Adjusted Operative Mortality for Mitral Valve Replacement/Repair (MVR). • Risk-Adjusted Operative Mortality MVR+CABG Surgery. • Risk-Adjusted Operative Mortality for AVR+CABG. • Surgical Volume—a. Isolated Coronary Artery Bypass Graft (CABG) Surgery, b. Valve Surgery, c. CABG+Valve Surgery. • Timing of Antibiotic Prophylaxis for Cardiac Surgery Patients. • Selection of Antibiotic Prophylaxis for Cardiac Surgery Patients. • Pre-Operative Beta Blockade. • Duration of Prophylaxis for Cardiac Surgery Patients. • Prolonged Intubation (ventilation). • Deep Sternal Wound Infection Rate. • Stroke/Cerebrovascular Accident. • CABG Composite Score. Response: We thank the commenters for their suggestions which we will take into consideration for future measures. Comment: Many commenters were supportive of our proposed list of future measures and measure topics. Response: We thank the commenters for their support of our future measure PO 00000 Frm 00164 Fmt 4701 Sfmt 4700 topics and will take their comments into consideration in our selection of future measures. Comment: Many commenters supported the inclusion of The Joint Commission Smoking Cessation and Tobacco measure sets for the Hospital IQR Program and recommended EHR- E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations based reporting for these measures. For future cardiac readmission measures, one commenter recommended that CMS take into account the FDA-approved new classes of medications for prevention of cardiac readmissions and improvement of patient outcomes. One commenter suggested that any 30-day ischemic stroke mortality or readmission measure must include stroke severity as a risk-adjustment factor. Response: We thank the commenters for their specific suggestions and will consider them as we decide which measures to propose to adopt in the future for the Hospital IQR Program. Comment: Some commenters were opposed to some measures and measure topics on our list of future measure and measure topics: One commenter opposed the Nursing Sensitive Care measures and Readmission measures for AMI, HF, PN, and PCI. One commenter opposed the adoption of the ventilator associated pneumonia (VAP) measure because the commenter believed that the definitions and diagnosis are problematic, and opposed the adoption of the SCIP, and MDRO measures because they are not NQF-endorsed. Two commenters were opposed to the care coordination measure. A commenter opposed the adoption of the SCIP (process) measure (short Half-Life prophylactic administered preoperatively redosed within 4 hours after preoperative dose) because the related Surgical Site Infection (SSI) outcome measure is already part of the Hospital IQR Program. Response: We thank the commenters for their recommendations and will take them into consideration as we decide which measures to propose to adopt in the future for the Hospital IQR Program. Comment: Some commenters recommended measures that are not on our list of future measures and measure topics. One commenter proposed a new measure for hyponatremia. One commenter proposed a measure for AMI and HF such as the NQF-endorsed Heart Failure (HF): Beta-blocker therapy (NQF #0083). One commenter supported a surgical checklist measure for Hospital IQR Program. One commenter recommended NQF-endorsed wound care measures and malnutrition evaluation measures if they are available. One commenter recommended adopting measures that would indicate share-decision making in hospitals. One commenter suggested a measure for Surgical Site Infection following implementation of a CIED. One commenter recommended PTCA Readmission measures. One commenter strongly urged CMS to adopt measures VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 based on registry data (for example, CABG), CTM–3, PAC measures, efficiency measures, CAD and CHD measures, patient-reported outcomes, and cross-cutting measures of care for patients with multiple chronic conditions. Response: We appreciate all the suggestions for additional measures and measure topics and will take them into consideration as we decide which measures to propose to adopt in the future for the Hospital IQR Program. Comment: One commenter recommended that, in addition to current reporting efforts, future reporting should strike a balance between driving quality and system improvement as well as attempt to capture the entire episode of care so that the quality of care and care continuum can be better portrayed. Response: We thank the commenter for the recommendation and will take it into consideration as we decide which measures to propose to adopt in the future for the Hospital IQR Program. We thank the commenters for their comments and suggestions regarding future Hospital IQR measure adoption. 5. Form, Manner, and Timing of Quality Data Submission a. Background Sections 1886(b)(3)(B)(viii)(I) and (II) of the Act state that the applicable percentage increase, for FY 2007 and each subsequent fiscal year, shall be reduced by 2.0 percentage points (or, beginning with FY 2015, by one-quarter of such applicable percentage increase (determined without regard to sections 1886(b)(3)(B)(ix), (xi), or (xii) of the Act) 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 requirements for security of protected health information. In order to participate in the Hospital IQR Program, hospitals must meet specific procedural requirements. Hospitals choosing to participate in the Hospital IQR Program must also meet specific data collection, submission, and validation requirements. PO 00000 Frm 00165 Fmt 4701 Sfmt 4700 51639 b. Procedural Requirements for FY 2012 Payment Determinations and Subsequent Years In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25914 through 25920), we proposed Hospital IQR Program procedural requirements that are, for the most part, the same as the procedures adopted in the FY 2011 IPPS/LTCH PPS final rule for the Hospital IQR Program. Hospitals must comply with the following procedural requirements to participate— • Register with QualityNet, before participating hospitals initially begin reporting data, regardless of the method used for submitting data. • Identify a QualityNet Administrator who follows the registration process located on the QualityNet Web site (https://www.QualityNet.org). • Complete a Notice of Participation. New subsection (d) hospitals and existing hospitals that wish to participate in the Hospital IQR Program for the first time must complete an online Notice of Participation (formerly known as ‘‘Reporting Hospital Quality Data for Annual Payment Update Notice of Participation,’’ also referred to as IPledge) that includes the name and address of each hospital campus that shares the same CMS Certification Number (CCN). We revise the Notice of Participation periodically as needed and provide appropriate notification of any revisions to hospitals and QIOs through the routine Hospital IQR Program communication channels, which include memo and e-mail notification and QualityNet Web site articles and postings. • 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 Hospital IQR Program and has not otherwise submitted a Notice of Participation using the new CCN must submit a completed Notice of Participation no later than 180 days from the date identified as the open date (that is, the Medicare acceptance date) on the approved CMS Quality Improvement Evaluation System (QIES) (which we referred to in the proposed rule as the CMS Online System Certification and Reporting (OSCAR) system) to participate in the Hospital IQR Program. We proposed regulation text to codify this requirement. • We will accept Hospital IQR Program withdrawal forms for the FY 2013 payment determination from hospitals any time from October 1, 2011 until August 15, 2012. The August 15, 2012 deadline will give us sufficient E:\FR\FM\18AUR2.SGM 18AUR2 51640 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 time to update the FY 2013 payment to hospitals starting on October 1, 2012. If a hospital withdraws from the program for the FY 2013 payment determination, it will receive a reduction of 2.0 percentage points to the FY 2013 applicable percentage increase. Once a hospital has submitted a Notice of Participation, it is considered to be an active Hospital IQR Program participant until such time as the hospital submits a withdrawal form to CMS. • We will determine if a hospital has complied with our data submission requirements by looking at whether the hospital has properly submitted data to the appropriate data warehouses for HCAHPS, CDC/NHSN, chart-abstracted measures, and structural measure quality measure data during the four calendar year quarters of FY 2012. The Hospital IQR Program procedural requirements have remained relatively unchanged for the past several years and we proposed to codify them at 42 CFR 412.140. We invited public comment on this proposal. We received no comments on our proposal to codify the Hospital IQR Program procedural requirements. Therefore, for the reasons described above, we are codifying the Hospital IQR Program procedural requirements at 42 CFR 412.140. c. Procedural Requirements for FY 2013 and Subsequent Years In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25915), we proposed that hospitals that have an open date (as noted on the approved CMS OSCAR system/QIES) before March 31, 2009 that did not participate in the Hospital IQR Program in FY 2011 or FY 2012 but that wish to participate in the Hospital IQR Program for the FY 2013 payment determination must submit a completed Notice of Participation to CMS on or before December 31, 2011. These hospitals, unlike hospitals that receive a new CCN, do not need to get their operations up and running. Therefore, we believe this is a reasonable deadline that will enable these hospitals to decide whether they want to participate in the Hospital IQR Program while also enabling us to collect enough data from them to make an accurate FY 2013 payment determination. We proposed regulation text that provides that hospitals that would like to participate in the Hospital IQR Program for the first time, or that previously withdrew from the program and would like to participate again, must submit to CMS a completed Notice of Participation Form by December 31 of the fiscal year preceding the fiscal year in which they would like to participate. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 We received no comments regarding the proposal to require hospitals to submit a completed Notice of Participation Form by December 31 of the fiscal year preceding the fiscal year in which they would like to participate. Therefore, for the reasons described above, we will require a completed Notice of Participation Form by December 31 of the fiscal year preceding the fiscal year in which they would like to participate. d. Data Submission Requirements for Chart-Abstracted Measures In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 2525915), we proposed to reduce the quarterly submission deadline for chart-abstracted quality measures from 41⁄2 months to 104 days. In other words, for FY 2014 payment determinations, the quarterly deadline for the quality measures under the topic that require chart abstraction (AMI, HF, PN, SCIP, Emergency Department Throughput (EDT), and Global Immunization (GIM)) will be 104 days following the last discharge date in the calendar quarter. We proposed to reduce the data submission deadline in order to allow for a correction period, which we will propose in future rulemaking. We also believe that this proposed change will encourage hospitals to utilize quality measure information in a more rapid manner to facilitate quality improvement. We also want to provide hospitals sufficient notice of any proposed changes to our submission deadline, since we recognize the advance time needed by hospitals to modify their recordkeeping and abstraction practices to comply with this proposed requirement. We also proposed to change the aggregate population and sampling deadline from 4 months to 3 months to align with the corresponding proposal to change the data submission deadline from 135 to 104 days. We will continue to require hospitals to submit aggregate population and sample size counts to CMS on a quarterly basis for Medicare and nonMedicare discharges for the topic areas for which chart-abstracted data must be submitted (currently AMI, HF, PN, and SCIP) (75 FR 50221). Starting with the FY 2014 payment determination, we proposed to change the submission deadline for hospitals to submit aggregate population and sample size count data for the measures requiring chart abstraction from 4 months to 3 months following the last discharge date in the calendar quarter. We proposed this 3-month deadline for submission of the aggregate population and sample size counts data to provide CMS with PO 00000 Frm 00166 Fmt 4701 Sfmt 4700 information necessary to notify hospitals about their data completeness status. Specifically, we currently provide a Provider Participation Report the day after the submitted file is processed, which includes a calculation of the number of hospital submitted cases by topic, hospital self-reported aggregate population and sample size count, and Medicare FFS claims by clinical topic and SCIP surgical category. We expect that hospitals will use this report after submission to assess their patient-level data completeness and will submit additional patient-level cases before the proposed quarterly patient-level deadline. We proposed to provide hospitals with the same 14-day period after the proposed aggregate population and sample size count deadline to submit the required patientlevel records. Comment: Several commenters opposed the shorter timeframes due to the increased administrative burden that this would create for hospitals. Response: We appreciate the comment and are sensitive to the burden faced by hospitals to meet the requirements under the Hospital IQR Program. In the CY 2012 OPPS/ASC proposed rule (76 FR 42363 through 42365), we proposed to implement a review and corrections process for the Hospital VBP Program that would give hospitals an opportunity to review and correct data submitted on all Hospital IQR Program chart-abstracted measures, whether or not those measures are adopted as Hospital VBP Program measures. We noted that under the Hospital IQR Program, hospitals currently have an opportunity to submit, review, and correct any of the chart-abstracted information submitted to the QIO Clinical Warehouse for the full 41⁄2 months following the last discharge date in a calendar quarter, although we also noted that we had proposed to shorten this period. In response to the comments stating that the shortened timeframe would increase the burden to hospitals under the Hospital IQR Program, we re-examined the timing issues that had prompted us to propose to shorten the period and concluded that the existing 41⁄2 month submission period would give hospitals a sufficient amount of time to review and correct their chart-abstracted data, and would also give us a sufficient amount of time to perform our administrative functions. For this reason, we will not finalize our proposal to shorten the chart-abstracted data submission period to 104 days, and hospitals will continue to have 41⁄2 months following the last discharge date in a calendar quarter to submit their E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations chart-abstracted data for that quarter. To be consistent with our decision to retain the 41⁄2 month data submission period, we will also not finalize our proposal to shorten the aggregate population and sampling deadline from 4 months to 3 months, and hospitals will continue to have 4 months to submit this data. Comment: One commenter expressed concern that the reduced submission deadline would reduce the amount of time vendors have to analyze, report and resubmit the various data files. Response: We thank the commenter for their input and appreciate the commenter’s concern regarding the proposed reduced timeframes. For the reasons stated above, we will not finalize our proposals to shorten the chart-abstracted data submission deadline or the aggregate population and sampling deadline. Comment: A few commenters suggested that efforts be made to synchronize reporting timeframes with other standard reporting requirements, such as The Joint Commission’s requirements and timeframes. Response: We believe that the reporting deadlines we have developed for the Hospital IQR Program take into consideration both the burden to hospitals and our administrative and operational needs. However, we appreciate the commenters’ suggestion to align our reporting deadlines with the reporting deadlines imposed by other organizations and will take it into consideration in developing future rulemaking. Comment: Many commenters suggested that CMS shorten the data submission timeline from 135 days to 122 days, not the proposed 104 days. These commenters asserted that this would build in time for a data correction period while ensuring that hospitals are not overwhelmed by a drastically shortened data collection period. Response: We thank the commenters for their input. As noted above, we are not finalizing our proposals to shorten the chart-abstracted data submission deadline or the aggregate population and sampling deadline. However, we will take the commenters’ suggestions into consideration in developing future rulemaking. Comment: One commenter supported the reduction in submission days because it would increase efficiency in the program. A few commenters supported the opportunity to review and correct data and suggested the reduced submission deadline was not a burden in exchange for the review opportunity. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Response: We thank the commenters for supporting our proposals to shorten the chart-abstracted data submission deadline and the aggregate population and sampling deadline, however for the reasons noted above, we will not be finalizing these proposals. After consideration of the public comments we received, we will not finalize our proposal to shorten the chart-abstracted data submission period to 104 days, and hospitals will continue to have 41⁄2 months following the last discharge date in a calendar quarter to submit their chart-abstracted data for that quarter. To be consistent with our decision to retain the 41⁄2 month data submission period, we will also not finalize our proposal to shorten the aggregate population and sampling deadline from 4 months to 3 months, and hospitals will continue to have 4 months to submit this data. We did not receive any comments on our proposal to continue providing hospitals with 14 days after the aggregate population and sample size count deadline to submit the required patient-level records, and we are finalizing that proposal. e. Sampling and Case Thresholds Beginning with the FY 2015 Payment Determination In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25915 through 25916), we proposed to continue the requirement for hospital submission of population and sampling data for the FY 2015 payment determination and future years. Hospitals must submit to CMS quarterly aggregate population and sample size counts for Medicare and non-Medicare discharges for the topic areas for which chart-abstracted data must be submitted (AMI, HF, PN, SCIP, EDT and GIM). Hospitals are required to submit their aggregate population and sample size count for each topic area. In accordance with the policy we adopted in the FY 2011 IPPS/LTCH PPS final rule, hospitals that have not treated patients in a specific topic area must still submit quarterly population and sample size counts for all Hospital IQR chart-abstracted data topics. 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. We view it as vital for hospitals to determine accurately their aggregate population and appropriate sampling size data in order for CMS to assess hospitals’ data reporting completeness for their total population of cases, Medicare and nonMedicare. PO 00000 Frm 00167 Fmt 4701 Sfmt 4700 51641 In order to reduce the burden on hospitals that treat a low number of patients in a Hospital IQR 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 would not be required to submit patientlevel 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. Hospitals meeting the five or fewer patient discharge exception may voluntarily submit these data. We strongly recommend that hospitals review the QIO Clinical Warehouse Feedback Reports and the Hospital IQR Program Provider Participation Reports that are available after patient-level data are submitted to the QIO Clinical Warehouse. We generally update 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. Therefore, we are finalizing our proposal regarding hospital submission of population and sampling data for the FY 2015 payment determination and future years as proposed. f. HCAHPS Requirements for the FY 2013, FY 2014, and FY 2015 Payment Determinations In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25916 through 25917), beginning with discharges occurring in third quarter CY 2011, we proposed to move the HCAHPS data submission deadline forward by one week in order to allow for a review and correction period, which we will propose in future rulemaking. Currently, hospitals have about 14 weeks after the end of a calendar quarter to submit HCAHPS data for that quarter to the QIO Clinical Warehouse. If this proposal is adopted, hospitals will have about 13 weeks after the end of a calendar quarter to submit HCAHPS data for that quarter to the QIO Clinical Warehouse. Other than this proposed change, we did not propose any other changes to the HCAHPS requirements for the FY 2013 and FY 2014 Hospital IQR Program payment determinations, which were adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50220). For FY 2015 Hospital IQR payment determinations, we proposed to continue the HCAHPS requirements as follows. Under these requirements, a hospital must E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51642 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 HCAHPS Web site at: https://www.hcahpsonline.org. A current list of approved HCAHPS survey vendors can be found on the HCAHPS Web site. For the FY 2015 Hospital IQR Program, we proposed that the HCAHPS data will be based on discharges from January 1, 2013 through December 31, 2013. Every hospital choosing to contract with a survey vendor must 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 survey administration.) Hospitals are strongly encouraged to submit their entire patient discharge list, excluding patients who had requested ‘‘no publicity’’ status or who are excluded because of State regulations, in a timely manner to their survey vendor to allow adequate time for sample creation, sampling, and survey administration. We wish to emphasize that hospitals must also provide the administrative data that is required for HCAHPS in a timely manner to their survey vendor. This includes the patient MS–DRG at discharge, or alternative information that can be used to determine the patient’s service line, in accordance with the survey protocols in the most recent HCAHPS Quality Assurance Guidelines. We note that the HCAHPS Quality Assurance Guidelines require that hospitals maintain complete discharge lists that indicate which patients were eligible for the HCAHPS survey, which patients were not eligible, which patients were excluded, and the reason(s) for ineligibility and exclusion. (We refer readers to the Quality Assurance Guidelines located at https:// www.hcahpsonline.org for details about VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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. Hospitals must submit at least 300 completed HCAHPS surveys in a rolling four-quarter period unless the hospital is too small to obtain 300 completed surveys. We wish to emphasize that the absence of a sufficient number of HCAHPS eligible discharges is the only acceptable reason for submitting fewer than 300 completed HCAHPS surveys in a rolling four quarter period. If a hospital obtains fewer than 100 completed surveys, the hospital’s HCAHPS scores will be accompanied by a footnote on the Hospital Compare Web site alerting the Web site users that the scores should be reviewed with caution, as the number of surveys may be too low to reliably assess hospital performance. 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. 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. As needed, hospitals and survey vendors will be subject to followup site visits or conference calls. We wish to point out that the HCAHPS Quality Assurance Guidelines state that hospitals should refrain from activities that explicitly influence how patients respond on the HCAHPS survey. If we determine that a hospital is not PO 00000 Frm 00168 Fmt 4701 Sfmt 4700 compliant with HCAHPS program requirements, we may determine that the hospital is not submitting HCAHPS data that meet the requirements of the Hospital IQR 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 Hospital IQR 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 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 are encouraging hospitals to regularly check the HCAHPS Web site at https://www.hcahpsonline.org for program updates and information. Comment: One commenter asked about the purpose of the proposed HCAHPS review and correction period. Another commenter recommended that CMS change its HCHAPS data submission timeline to match the current Joint Commission data submission schedule, which is two weeks earlier than the CMS deadline. Response: The proposed one-week HCAHPS review and correction period would allow a formal opportunity for hospitals (or their HCAHPS survey vendors) to resubmit data for patients in order to correct errors in the data submitted for those patients prior to the review and correction period. Given the amount of time necessary for participating hospitals or their survey vendors to fully administer the HCAHPS survey, receive survey responses, and create the necessary data files, we do not believe it is appropriate to further shorten the data submission period either by beginning the period sooner, or ending it sooner. After consideration of the public comments we received, we are finalizing the HCAHPS requirements discussed above, as proposed. In the Hospital Inpatient VBP Program proposed rule, we proposed that HCAHPS scores become part of the FY 2013 Hospital VBP Program (76 FR 2462). We adopted that proposal in the Hospital Inpatient VBP Program final rule (76 FR 26510). As HCAHPS scores become incorporated in hospital payment, we believe that a neutral third-party should administer the E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations survey for hospitals whose annual payment updates will be affected by their HCAHPS scores. It is our belief that an experienced survey vendor will be best able to ensure reliable results. Therefore, we are considering whether to require that-subsection (d) hospitals engage an HCAHPS-approved survey vendor to administer the HCAHPS survey. We invited public comment that will inform our future policy on this issue Comment: One commenter expressed support for requiring the use of an approved survey vendor to administer the HCAHPS survey when the survey will be used for hospital payment purposes. Response: We thank the commenter for this suggestion. We are considering this policy change for the future and we will take this suggestion into 51643 consideration as we develop future proposals. g. Procedures for Claims-Based Measures In the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to adopt a new claims-based measure for FY 2014, the Medicare Spending per Beneficiary Measure, which is included in the chart below. FY 2014 Payment determination: adopted and proposed claims-based quality measures (no additional hospital data submission required) Topic Mortality Measures (Medicare Patients) ........... Readmission Measure (Medicare Patients) ..... AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs) and Composite Measures. AHRQ PSI and Nursing Sensitive Care ........... Hospital Acquired Condition Measures ............ Cost Efficiency .................................................. • • • • • • • • • • • • • • • • • • • • • • • • • Acute Myocardial Infarction (AMI) 30-day mortality rate. Heart Failure (HF) 30-day mortality rate. Pneumonia (PN) 30-day mortality rate. Acute Myocardial Infarction 30-day Risk Standardized Readmission Measure. Heart Failure 30-day Risk Standardized Readmission Measure. Pneumonia 30-day Risk Standardized Readmission Measure. PSI 06: Iatrogenic pneumothorax, adult. PSI 11: Post Operative Respiratory Failure. PSI 12: Post Operative PE or DVT. PSI 14: Postoperative wound dehiscence. PSI 15: Accidental puncture or laceration. IQI 11: Abdominal aortic aneurysm (AAA) mortality rate (with or without volume). IQI 19: Hip fracture mortality rate. Complication/patient safety for selected indicators (composite). Mortality for selected medical conditions (composite). PSI 04 Death among surgical inpatients with serious treatable complications. 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 Urinary Tract Infection (UTI). Manifestations of Poor Glycemic Control. Medicare Spending per Beneficiary.* mstockstill on DSK4VPTVN1PROD with RULES2 * New proposed measure for FY 2014. We did not propose to change the procedures and time periods we adopted in the FY 2011 IPPS/LTCH PPS final rule for the FY 2012, FY 2013 and FY 2014 payment determinations. For the FY 2014 payment determination, we proposed to use up to 3 years of Medicare FFS claims data to calculate the measures, as appropriate for the measures. Hospitals are encouraged to regularly check the QualityNet Web site, https:// www.QualityNet.org, for program updates and information. We received no comments on these procedures and are finalizing them with the clarification that we will use 3 years of Medicare FFS claims data to calculate the measures. h. Data Submission Requirements for Structural Measures Structural measures assess the characteristics and capacity of the provider to deliver quality healthcare. In the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to add one additional structural measure for the FY 2014 payment determination, Participation in a Systematic Clinical Database Registry for General Surgery. Beginning with FY 2013, we proposed to align the submission deadline for all structural measures with the submission deadline for the fourth calendar quarter of the chart-abstracted measures.34 We proposed to update the period of data collection that hospitals will submit the Topic required registry participation information once annually for the structural measures via a Web-based collection tool between April 1, 2012 and May 15, 2012 with respect to the time period of January 1, 2011 through December 31, 2011. This proposal will give CMS a more complete picture of registry participation as well as synchronize data submissions for structural and chart-abstracted measures. These measures do not require the hospital to participate in a registry. Below is the list of structural measures we have adopted for the FY 2014 payment determination: FY 2014 Payment determination: Structural measures Cardiac Surgery ................................................ Stroke Care ...................................................... • Participation in a Systematic Database for Cardiac Surgery. • Participation in a Systematic Clinical Database Registry for Stroke Care. 34 We corrected this language in the proposed rule in a correction notice published at 76 FR 34633 to remove an incorrect reference to these measures VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00169 Fmt 4701 Sfmt 4700 aligning in FY 2014, when in fact they will be aligned starting in FY 2013. E:\FR\FM\18AUR2.SGM 18AUR2 51644 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Topic FY 2014 Payment determination: Structural measures Nursing Sensitive Care ..................................... General Surgery ............................................... • Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care. • Participation in a Systematic Clinical Database Registry for General Surgery.* * New measure for FY 2014 proposed in the FY 2012 IPPS/LTCH PPS proposed rule and adopted in this final rule. Comment: Several commenters noted an error in the proposed rule regarding the date of collection and the period of collection for the proposed structural measure as well as the existing structural measures. Response: We issued a correction notice on this issue on June 14, 2011 (76 FR 34633 through 34634). The correction notice corrected both the period of time for which the data will be corrected as well as the timeframe during which we will actually collect the data. We erroneously stated in the proposed rule at (76 FR 25898) that collection would begin in July 2012 with respect to the time period January 1, 2012 to June 30, 2012, instead of collection to begin in April 2013 with respect to the time period January 1, 2012 through December 31, 2012. Comment: A few commenters supported the alignment of the data collection for structural measures with the data submission deadline for the fourth quarter of the chart-abstracted measures. Response: We appreciate the commenters’ support for this proposed alignment. After consideration of the public comments we received, we are finalizing our proposal that, beginning with FY 2013, we are aligning the submission deadlines for all structural measures with the submission deadline for the fourth calendar quarter of the chart-abstracted measures. For FY 2013, hospitals will be required to submit the required registry participation information once annually for the structural measures via a Web-based collection tool between April 1, 2012 and May 15, 2012 with respect to the time period of January 1, 2011 through December 31, 2011. For FY 2014, hospitals will be required to submit the required registry participation information once annually for the structural measures via a Web-based collection tool will be between April 1, 2013 and May 15, 2013 with respect to the time period of January 1, 2012 through December 31, 2012. i. Data Submission and Reporting Requirements for Healthcare-Associated Infection (HAI) Measures Reported via NHSN As discussed above, in the FY 2012 IPPS/LTCH PPS proposed rule we proposed to adopt 2 new HAI measures for the FY 2014 payment determination and 3 HAI measures for FY 2015 payment determination. For FY 2014, only the Catheter Associated Urinary Tract Infection will be adopted. For FY 2015, we are adopting all of the three HAI measures that we proposed: Healthcare Provider Influenza Vaccination, MRSA Bacterimia and C. Difficile. Below is the list of HAI measures we are finalizing for the FY 2014 and FY 2015 payment determinations: FY 2014 and 2015 Payment determination: Adopted healthcare-associated infection measures (CDC/NHSN) Topic • • • • • Surgical Site Infection.* Catheter Associated Urinary Tract Infection.** Clostridium Difficile.*** Healthcare Provider Influenza Vaccination.*** MRSA Bacteremia.*** * Measures adopted for FY 2014 payment determination in the FY 2011 IPPS/LTCH PPS final rule. ** Measure adopted for FY 2014 payment determination in this final rule. *** Measures adopted for FY 2015 payment determination in this final rule. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 259219 through 25920), we proposed to update the current data submission and reporting requirements for these proposed measures. Specifically, we proposed to utilize the data submission and reporting standard procedures that have been set forth by CDC for NHSN participation in general and for submission of these measures to NHSN. We refer readers to the CDC’s NHSN Web site (https://www.cdc.gov/nhsn) for detailed data submission and reporting procedures. We believe that these procedures are feasible because they are already widely used by over 4,000 hospitals reporting HAI data using the NHSN. Our proposal seeks to reduce hospital burden by aligning CMS data submission and reporting procedures with NHSN procedures currently used by hospitals, including hospitals complying with 28 State HAI reporting requirements. The existing data collection and submission timeframes for the HAI measures for the FY 2014 payment determination, which we proposed to use for the HAI measures we have proposed above, are shown below. Hospitals must submit their quarterly data to NHSN for Hospital IQR Program purposes on or around the dates shown in the table below (updates to this will be posted on the QualityNet Web site). mstockstill on DSK4VPTVN1PROD with RULES2 SUBMISSION TIMEFRAMES FOR HAI MEASURES FOR THE FY 2014 PAYMENT DETERMINATION CDC–NHSN Collection and quarterly report generation timeframe CY 2012 Infection Events Q1 Q2 Q3 Q4 (Jan–Mar 2012) ............................................ (Apr–Jun 2012) ............................................ (Jul–Sep 2012) ............................................. (Oct–Dec 2012) ............................................ VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 January 31st—August 15th .............................. April 30th—November 15th .............................. July 31st—Feb-15th ......................................... October 31st—May 15th .................................. PO 00000 Frm 00170 Fmt 4701 Sfmt 4700 Final submission deadline for hospital IQR program FY 2014 payment determination August 15, 2012. November 15, 2012. February 15, 2013. May 15, 2013. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Hospitals would have until the Hospital IQR Program final submission deadline to submit their quarterly data to NHSN. After the final Hospital IQR Program submission deadline has occurred for each CY 2012 quarter, CMS will obtain the hospital-specific calculations that have been generated by the NHSN for the Hospital IQR Program. We invited public comment on this proposal. Comment: A few commenters requested clarification of the data collection dates for the MRSA and C. Difficile SIR measures for FY 2015 payment determination. Response: For the FY 2015 payment determination, data collection will begin with January 1, 2013 events. After consideration of the public comments we received, we will adopt the data submission and reporting standard procedures that have been set forth by CDC for NHSN participation in general and for submission of these measures to NHSN as listed above. 6. Chart Validation Requirements for Chart-Abstracted Measures mstockstill on DSK4VPTVN1PROD with RULES2 a. Changes to the Chart Validation Requirements and Methods for the FY 2012 Payment Determination and Subsequent Years In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25920 through 25922), we proposed several changes to the chart validation requirements and methods we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50225 through 50229) for the FY 2012 payment determination and subsequent years. In previous years, charts were requested by the CMS CDAC contractor and hospitals were given 45 days from the date of the request to submit the requested records. If any record(s) were not received by the 45-day requirement, the CMS CDAC contractor assigned a ‘‘zero’’ validation score to each measure in a missing record. We proposed to change the time period given to hospitals to submit medical records to the CDAC contractor to 30 calendar days, and we proposed to codify this proposal at 42 CFR 412.140(d)(1). This proposed change in submission timeframe will align the current process with the requirements in 42 CFR 476.78(b)(2), which currently allow only 30 days for chart submission in the context of reviews by QIOs. We proposed this deadline modification to reduce the time we need to complete validation, and provide hospitals with feedback on their abstraction accuracy. We believe that this linkage between Hospital IQR Program validation discharge quarters and the same fiscal year’s Hospital VBP Program proposed VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 performance period would improve the reliability and accuracy of the Hospital VBP Program’s chart-abstracted measures. Hospitals that are subject to Hospital IQR payment reduction due to not passing our validation requirement would be excluded from receiving a Hospital VBP performance score and corresponding incentive payment under section 1886(o)(1)(C)(ii)(I) of the Act. Thus, CMS would ensure that the data submitted on chart-abstracted measures we adopt for the Hospital VBP Program is accurate by virtue of validating it under the validation procedures we have adopted for the Hospital IQR Program. Comment: A few commenters recommended that CMS consider options to receive electronic copies of records rather than paper records. Response: We appreciate the feedback and will consider the suggestion in developing future rulemaking to reduce the validation burden to hospitals using electronic health records. We recognize that many more hospitals will transition their recordkeeping to EHRs in the coming years, and we will strive to provide the public with accurate quality data while maintaining alignment with hospital recordkeeping practices. Comment: Most commenters supported the reduction in the time frame for hospitals to submit the requested records to the CDAC contractor from 45 calendar days to 30 calendar days if the reduction will improve the timeliness of feedback to the hospitals. Response: We appreciate the input and believe that the reduction will improve the timeliness of feedback to the hospitals. Comment: Some commenters oppose the reduction in the time frame as this decrease in the timeframe would negatively impact hospitals’ capability to respond in a timely manner and could negatively affect hospitals’ ability to perform quality checks. Response: We appreciate the comment, but believe that decreasing the time frame for chart submission will allow CMS to provide more timely feedback to hospitals on the validation results. Comment: One commenter believed that validating Hospital VBP data under the Hospital IQR Program data would efficiently use both CMS and hospital resources. Response: We appreciate the commenter’s support for this proposal. After consideration of the public comments we received, we are adopting as final our proposal to change the time period given to hospitals to submit medical records to the CDAC contractor PO 00000 Frm 00171 Fmt 4701 Sfmt 4700 51645 from 45 to 30 calendar days, and are codifying this policy at 42 CFR 412.140(d)(1). b. Supplements to the Chart Validation Process for the FY 2014 Payment Determination and Subsequent Years In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25920 through 25922), we proposed to continue to use the supplements to the chart validation requirements and methods we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50227 through 50229) for FY 2014 payment determinations and future years with several proposed modifications. We proposed 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 Hospital IQR Program validation samples. We proposed this addition to supplement our validation approach to ensure that all eligible Hospital IQR Program hospitals are selected for validation at least once every 4 years. We proposed this addition starting in FY 2015 because FY 2015 would be the fourth year that CMS would have used the random validation approach (which begins in FY 2012 as adopted in the FY 2011 IPPS/LTCH PPS final rule). We invited public comment on this proposal. Comment: One commenter disagreed with the policy we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50229) to conduct random sampling of hospitals, and believes that CMS should utilize the charts provided to the QIOs to identify hospitals potentially submitting poor quality data. Response: Section 1886(b)(3)(B)(viii)(XI) of the Act states that ‘‘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.’’ We believe that our FY 2012 Hospital IQR Program validation process meets the requirement regarding randomly selected hospitals in section 1886(b)(3)(B)(viii)(XI) of the Act. While we appreciate the commenter’s concern, we believe that by ensuring all hospitals are validated at least once every four years, we will ensure that hospitals with poor data are identified. In addition, we note that, under the policy that we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50227 through 50229), E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51646 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations hospitals that fail validation for the FY 2012 payment determination and subsequent years will be selected for validation the following year to ensure deficiencies are corrected. Comment: Most commenters supported a requirement that eligible hospitals be selected at least once every four years for validation. Most commenters also stated that because CMS intends to use the results of Hospital IQR chart validation for the Hospital VBP Program, all eligible hospitals should be regularly included in the chart validation process. Response: We appreciate the commenters’ support for this proposal to ensure that all hospitals are validated at least once every 4 years. After considering the public comments we received, we are adopting as final the proposal to supplement our validation approach to ensure that all eligible Hospital IQR Program hospitals are selected for validation at least once every 4 years. 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. This sample size is sufficient to validate more than 22 percent of subsection (d) hospitals in an applicable fiscal year and ensure accuracy of the Hospital IQR Program quality data. For the FY 2014 payment determination, we proposed to validate 24 chart-abstracted measures including 19 currently validated measures, and 5 proposed additional measures. The FY 2014 proposed validation reflects the 5 measures we proposed to add (2 EDT measures, Central Line Associated Blood Stream Infection, Global Influenza Immunization, and Global Pneumonia Immunization measures) and the 8 measures we proposed to retire (AMI–1, AMI–3, AMI–4, AMI–5, HF–4, PN–4, PN–5c, and SCIP Infection 6). Validation of the HCAHPS 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 to track a discharged patient from sampling to survey administration to data submission. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 We proposed, starting with FY 2014 payment determinations, a modest increase to the current Hospital IQR Program validation sample of SCIP, AMI, HF, and PN cases. Specifically, we proposed to add three charts per selected hospital per quarter to the validation sample. This additional quarterly sample would enable us to validate the CLABSI measure that we added to the Hospital IQR Program measure set beginning with the FY 2014 payment determination. CLABSI is a relatively rare event compared to SCIP, AMI, HF, and PN cases. In 2009, about 18,000 CLABSIs occurred in ICU patients in the United States, and these infections were a major contributor to prolonged hospital stays and inpatient mortality. We proposed a process to validate the CLABSI measure that takes into account the relative infrequency of this event and the case-finding methodology for it, specifically the requirements for a positive blood culture result and the presence of a central venous catheter in the patient at the time of, or within 48 hours before, onset of the infection. We recognize that the current validation process and sample size for AMI, HF, PN, and SCIP measures is not likely to be sufficiently reliable to detect systematic underreporting of CLABSI. Unlike the current AMI, HF, PN, and SCIP chart-abstracted process of care measures, CLABSI is a rarely occurring infection among acute care inpatient discharges. We estimate that about 0.1 percent to 0.2 percent of all acute care inpatient patient discharges nationwide involve patients who are infected with a CLABSI. We believe that our current Hospital IQR Program AMI, HF, PN, and SCIP sample sizes and sample methods would not reliably validate CLABSI measure rates at the hospital level because of the relatively rare occurrence of these events. We also seek to target validation of the CLABSI measure to minimize hospital burden in complying with our sample size proposals, for which hospitals must find, photocopy, and return requested medical records to CMS. If CMS did not utilize this targeted validation approach for the CLABSI measure, hospitals would have to submit 200 to 300 additional randomly selected cases in order to effectively validate this measure, given its rare occurrence. We believe that our proposed CLABSI validation process addresses these limitations through the use of a targeted incremental validation sample comprised of three charts of possible CLABSI events, and will reliably validate the Hospital IQR Program CLABSI measure while not PO 00000 Frm 00172 Fmt 4701 Sfmt 4700 overly burdening hospitals with medical record requests. Specifically, we proposed to identify sampled hospitals’ three quarterly potential CLABSI charts using a twostep selection process that would target intensive care unit patients with bloodstream infection (positive blood culture results) and a Central Venous Catheter (CVC) provided by sampled hospitals to CMS. In the first step of this process, a CMS contractor would require the 800 randomly sampled hospitals to provide a quarterly list of all blood cultures positive for infection status taken from intensive care units conducting CLABSI surveillance during the discharge quarter. We are aware that this list will include both reported CLABSI events and many non-CLABSI events, including patients with and without CVCs. In clinical terms, our intent in reviewing these positive blood culture lists is to identify the information needed to determine whether the blood culture isolate is a likely pathogen found at least once, or a common skin commensal (CSC) found in two or more positive blood cultures drawn on separate occasions. CSC’s are microorganisms that are commonly found on the skin and often indicate contamination of the blood culture media rather than infection by the microorganism when it is identified in a single blood culture test. Two sets of blood cultures are needed to differentiate true infection from contamination. The list of CSCs is comprised of the following organisms: diphtheroids (Corynebacterium spp.); Bacillus spp. (not B. anthracis); Priopionibacterium spp.; coagulase negative staphylococci including S. epidermidis; viridans group streptococci; Aerococcus spp.; and Micrococcus spp. This list of CSCs is also found at the NHSN Web site, https:// www.cdc.gov/nhsn/PDFs/pscManual/ 4PSC_CLABScurrent.pdf. We would also require hospitals to self-identify intensive care unit patients with a CVC that are on this blood culture list. Using all of this information, we would be able to identify intensive care unit patients with a bloodstream infection and with a CVC (that is, candidate CLABSI events) for subsequent sampling. In the second step of this process, we would randomly sample these candidate CLABSI events (ICU patients with a CVC and where a pathogen was recovered at least once or the same CSC was cultured from 2 or more blood cultures drawn on separate occasions). Specifically, the CMS CDAC would require hospitals to submit up to 3 medical records each quarter meeting these criteria, randomly selected by E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations CMS from among eligible charts. This number of medical records is sufficient to detect unreported CLABSI events based on our sample size analysis and experience from State health department validation efforts. This proposed process utilizes the validation experience from at least ten current State health department validation initiatives. In addition, we proposed to randomly validate CLABSI data by abstracting all necessary quality data from the 12 quarterly medical records in our AMI, HF, PN, and SCIP targets already collected for Hospital IQR Program validation as well as the 3 additional records we later propose to collect for ED throughput/ Immunization. Our intent in validating all currently requested quarterly medical records for CLABSI is to assess reliability of CLABSI measure rates from a random sample of patients independent from the proposed 3 record sample selected using blood culture lists and CVC presence to target underreporting of CLABSI events to the CDC’s NHSN. In our proposed 12 record random sample of CLABSI events, we will not use blood culture list and CVC presence in our sampling, since this sample is already drawn from the AMI, HF, PN, and SCIP hospital reported data reported to CMS. By combining a random and targeted sampling approach using two independent sources to validate CLABSI data, we believe that we are adequately assessing the accuracy and reliability of the CLABSI measure in accordance with section 1886(b)(3)(B)(viii)(XI) of the Act. We proposed to determine the CLABSI validation score using a process that begins with the CMS contractor validation coordinator comparing the CDAC’s CLABSI infection status to the hospital’s event data reported to NHSN for the applicable quarter. For each medical record reviewed, a hospital would receive a match only if the CMS contractor validation coordinator determines equivalency between the CMS contractor’s determination of infection status and the infection status reported to NHSN. For example, if one of the CMS-requested validation medical records revealed CLABSI and the event was not reported to the NHSN, then the hospital would receive a zero score for the CLABSI measure for that validated record. If the CMS contractor discovered that a second record in the CMS validation sample indicated no CLABSI event, but a CLABSI was reported to the NHSN for the record, the hospital would also receive a zero score for the CLABSI measure for that validation record. Thus, hospitals VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 would only receive a 100 percent CLABSI validation score for individual records if their CMS validation records’ CLABSI status was consistent with the information reported, or not reported, to NHSN. In the above example, if the CMS quarterly validation process identified that 13 out of 15 total sampled records accurately reported the presence of a CLABSI or did not report a CLABSI where none was present, then the hospital’s CLABSI validation score would be 13/15, or about 87 percent. Comment: One commenter suggested that the CLABSI chart validation process, which uses CDC criteria for identification of CLABSI events, requires experienced interpretation and is more subjective than current validation measure criteria. The commenter believed that CMS should validate mismatches using a Certified Infection Control Practitioner. The commenter recommended excluding the validation results for CLABSI from the overall score for the initial year of validation and allowing hospitals to appeal CLABSI mismatches regardless of the overall score in order to educate hospitals on CLABSI mismatches. Response: We appreciate the comment, and plan to provide educational feedback on all validated CLABSI cases on match status and abstracted reasons for CLABSI event status to hospitals. Based on the relatively rare nature of CLABSI events, we anticipate a relatively high match rate among hospitals surpassing the current 75 percent passing threshold. Based on this information, we believe that the proposed approach to validate CLABSI data is the least burdensome and most statistically sound approach. We also believe that providing hospitals with the opportunity to appeal validated cases that do not affect the overall score would delay completion of the entire appeals process. Comment: Some commenters did not support what they believed to be a manual and time consuming record identification process and expressed concerned that CMS has not identified exactly what data elements should be on the quarterly list of blood cultures positive for infection or what format would be used for submitting the list to CMS. Response: We appreciate the input and are aware of the additional time required by this process. We included this burden in our Paperwork Reduction Act burden request for public review and OMB consideration. However, we believe the need to ensure that information reported to the public is accurate and validated outweighs the additional burden. We will provide PO 00000 Frm 00173 Fmt 4701 Sfmt 4700 51647 additional information regarding the exact data elements and format for submission of the quarterly list of blood cultures positive for infection in future communications. Comment: One commenter expressed concern that the proposed CLABSI validation sample of three charts is not a sufficient sample. Response: We appreciate the commenter’s concern about the sample size for validation. However, the number of charts to be validated for CLABSI is actually 18 charts, not 3 charts. As stated above, in addition to validating the 3 CLABSI charts submitted by hospitals as part of the targeted CLABSI sample, we will also validate CLABSI data elements on the other 15 quarterly charts that are submitted for the AMI, HF, PN, SCIP and ED throughput/Immunization measures. Our intent in including three additional quarterly charts in the CLABSI validation sample is to target CLABSI events unreported to NHSN by using blood culture lists and ICU status to increase targeting efficiency. In addition, we weighed the burden to hospitals, the reliability of hospital validation results in the sample size, and the program costs of validation expenses when proposing the sample size. We believe these considerations support our proposal to use a threechart validation sample for CLABSI. Comment: One commenter expressed concern that the process of requiring hospitals to submit two additional lists and three charts has the potential to introduce new errors into the system and additional penalties for hospitals. The commenter recommended that the proposal be piloted and the burden assessed. Response: We appreciate the input and are aware of the additional time required by this process. However, we believe that this process will allow us to validate the CLABSI measure in the most efficient way possible. Although a pilot was not conducted, we collaborated with CDC and used the experience of State hospital health departments in validating CLABSI information in formulating this proposal. Comment: One commenter was concerned that CMS has not estimated the burden of work required for 800 hospitals to provide a quarterly list of blood cultures positive for infection status taken from ICUs conducting CLABSI surveillance during the discharge quarter. The commenter believed that additional consideration should be given to the time burdens on hospitals should they have to note on this list which samples came from E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51648 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations patients with CVCs in the ICUs under surveillance. The commenter believed that the practice of looking for unreported CLABSI cases among charts sent for AMI, HF, PN and SCIP measures may not be fruitful because only a small proportion of these patients will be in the ICU with CVCs. The commenter also questioned whether the proposed scoring model has been tested, if there has been any direct pilot experience with matching this data against NHSN data, and if there are reasons why cases omitted from NHSN would show up on the ICU blood culture list (or vice versa). Response: We appreciate the input and are aware of the additional time required by this process. We included this burden in our Paperwork Reduction Act burden request for public review and OMB consideration. However, we believe the need to ensure that information reported to the public is accurate and validated outweighs the additional burden. Although a pilot was not conducted, we collaborated with CDC and used the experience of State hospital health departments in validating CLABSI information in formulating this proposal. We believe that this process is less burdensome to hospitals than other options considered, including CMS onsite chart review and larger samples. We recognize that only a small proportion of cases for AMI, HF, PN, and SCIP patients will be in the ICU, however, we believe that validating the existence or absence of CLABSI and the associated match in NHSN for those limited cases will result in an appropriately validated quality measure. Comment: Several commenters urged CMS to evaluate whether or not the list can be procured from information that is stored in the NHSN. Response: The intent of the supplemental CLABSI sample of three quarterly charts is to target CLABSI events unreported to NHSN by using blood culture lists and ICU status to increase targeting efficiency. We believe that using reported NHSN events as the sole validation sample list would ignore the possibility of unreported CLABSI events. We intend to continue our collaboration with CDC in the future to assess and improve our validation process. After consideration of the public comments we received, we are adopting as final the proposal to identify sampled hospitals’ three quarterly potential CLABSI charts using the two-step selection process outlined above as well as abstracting all necessary quality data from the 15 quarterly medical records in our AMI, HF, PN, SCIP and ED Throughput/Immunization charts VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 already collected for Hospital IQR Program validation. Starting with the FY 2014 payment determination, we also proposed to add a sixth quarterly sample, which would enable us to validate the EDT measures and the Immunization for Influenza and Immunization for Pneumonia global measures that we added to the Hospital IQR Program measure set. We proposed to modify the current process (75 FR 50225–75 FR 50229) for these measures in two ways. First, we proposed to select 3 additional records each quarter from the records submitted by the 800 annually sampled hospitals. These records would only include principal diagnoses and surgical procedures not already included in the AMI, HF, PN, and SCIP populations eligible for validation sampling in these four topic areas. Second, we would abstract EDT and the Immunization for Influenza and Immunization for Pneumonia global measure data from the 15 quarterly AMI, HF, PN, SCIP and CLABSI records already submitted by hospitals for Hospital IQR Program validation. We would validate 18 records per quarter for these measures. With the addition of this sample of three records, we would ensure that all hospitals that reported chart-abstracted Hospital IQR data in all principal procedure and diagnosis codes would be eligible for sample selection for these global measures, thus, starting in FY 2014, 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, and (6) EDT/immunization measures. Comment: Several commenters supported the increased number of charts for validation in the Hospital IQR Program and believe the additional charts will enhance the validation process. Response: We appreciate the commenters’ support for this proposal. After consideration of the public comments we received, starting with FY 2014, we are adding a sixth quarterly sample to validate the EDT measures and the Immunization for Influenza and Immunization for Pneumonia global measures and to modify the current process as described above. 7. QIO Regulation Changes for Provider Medical Record Deadlines Possibly Including Serious Reportable Events In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25922 through 25923), we proposed changes to the QIO regulation text to require submission of medical records within 21 days of serious reportable events. Our State QIOs use information collected under the provision we proposed to change, 42 PO 00000 Frm 00174 Fmt 4701 Sfmt 4700 CFR 476.78, to educate hospitals on medical record abstraction accuracy, and to identify potential opportunities for quality improvement through medical record review. It is our goal to improve QIO work, such as quality improvement assistance, beneficiary (or beneficiary representative) requested QIO quality of care reviews, and QIO medical necessity reviews to achieve the following three aims: (1) Improve individual care; (2) improve health for populations; and (3) lower cost through improvement. QIOs serve a critical role in advancing these three aims through their work with Medicare providers and beneficiaries to advance quality care and health. To assist us in achieving these aims, we proposed changes to 42 CFR 476.78(b), along with minor editorial revisions. Specifically, we proposed to add a new § 476.78(b)(2)(ii) that would require the submission of medical information within 21 days in those situations in which a ‘‘serious reportable event’’ or other circumstance has been identified during the course of a QIO review. For purposes of this subsection, we proposed to define the term ‘‘serious reportable event’’ to be consistent with the NQF’s definition of a serious reportable event in its report ‘‘Serious Reportable Events in Healthcare 2006 Update.’’ These events include the following: Surgical Events • Surgery performed on the wrong body part. • Surgery performed on the wrong patient. • Wrong surgical procedure performed on a patient. • Unintended retention of a foreign object in a patient after surgery or other procedure. • Intraoperative or immediately postoperative death in an ASA Class I patient. Product or Device Events • Patient death or serious disability associated with the use of contaminated drugs, devices or biologics provided by the healthcare facility. • Patient death or serious disability associated with the use or function of a device in patient care in which the device is used or functions other than as intended. • Patient death or serious disability associated with intravascular air embolism that occurs while being cared for in a healthcare facility. Patient Protection Events • Infant discharged to the wrong person. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations • Patient death or serious disability associated with patient leaving the facility without permission. • Patient suicide, or attempted suicide, resulting in serious disability while being cared for in a healthcare facility. Care Management Events • Patient death or serious disability associated with a medication error (for example, errors involving the wrong drug, wrong dose, wrong patient, wrong time, wrong rate, wrong preparation or wrong route of administration). • Patient death or serious disability associated with a hemolytic reaction (abnormal breakdown of red blood cells) due to the administration of ABO/ HLA—incompatible blood or blood products. • Maternal death or serious disability associated with labor or delivery in a low-risk pregnancy while being cared for in a healthcare facility. • Patient death or serious disability associated with hypoglycemia, the onset of which occurs while the patient is being cared for in a healthcare facility. • Death or serious disability associated with failure to identify and treat hyperbilirubinemia (condition where there is a high amount of bilirubin in the blood) in newborns. • Stage 3 or 4 pressure ulcers acquired after admission to a healthcare facility. • Patient death or serious disability due to spinal manipulative therapy. • Artificial insemination with the wrong donor sperm or wrong egg. mstockstill on DSK4VPTVN1PROD with RULES2 Environmental Events • Patient death or serious disability associated with an electric shock while being cared for in a healthcare facility. • Any incident in which a line designated for oxygen or other gas to be delivered to a patient contains the wrong gas or is contaminated by toxic substances. • Patient death or serious disability associated with a burn incurred from any source while being cared for in a healthcare facility. • Patient death or serious disability associated with a fall while being cared for in a healthcare facility. • Patient death or serious disability associated with the use of restraints or bedrails while being cared for in a healthcare facility. Criminal Events • Any instance of care ordered by or provided by someone impersonating a physician, nurse, pharmacist, or other licensed healthcare provider. • Abduction of a patient of any age. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 • Sexual assault on a patient within or on the grounds of a healthcare facility. • Death or significant injury of a patient or staff member resulting from a physical assault (that is, battery) that occurs within or on the grounds of a healthcare facility. This proposed 21 day medical record deadline would be used when, for example, in the QIO’s judgment, delays in receiving medical information could negatively undermine its efforts to evaluate the quality of care provided or the facility’s adherence to payment policies. It also would enable QIOs to better utilize, and respond to, information about adverse events gained from the quality reporting program, in a timely fashion so that QIOs can have an improved and more immediate impact on the quality of health care. We also proposed a technical correction to 42 CFR 476.78(a) to correct a cross-reference. We invited public comment on our proposal to improve patient care through QIO access to more rapid provider information about ‘‘serious reportable events’’ and our proposed technical correction to 42 CFR 476.78(a). Comment: One commenter supported the regulation changes to require submission of medical information within 21 days of serious reportable events and wanted the investigation of these most serious and NQF-defined events to quickly evaluate the quality of care, to have a more immediate impact, and to prevent other such terrible events from occurring in a facility again. Response: We agree with the commenter and appreciate the support for this proposal. Comment: One commenter expressed concern that asking hospitals to report serious reportable events to both Patient Safety Organizations and to QIOs would create a duplication and undue burden on hospitals. Response: We appreciate the commenter’s concern but wish to clarify that this proposal does not change any existing requirements for reporting serious reportable events. This proposal would simply reduce the current submission requirement from 30 days to 21 days. Comment: One commenter asked that CMS clarify the term ‘‘medical information.’’ The commenter asked whether this term refers to the complete medical record or to portions of the medical record. The commenter also asked what CMS requires if the medical record is not yet complete. Response: We thank the commenter for these questions and refer the PO 00000 Frm 00175 Fmt 4701 Sfmt 4700 51649 commenter to 42 CFR 476.78(b) and 42 CFR 482.24. Hospitals, under these regulations in our conditions of participation, are required to provide patient care data and other pertinent information to the QIO at the time the QIO is collecting review information that is required for the QIO to make its determinations. This information includes, but is not limited to, the medical record. After consideration of the public comments we received, we are adopting the requirement that hospitals submit medical information within 21 days in those situations in which a ‘‘serious reportable event’’ or other circumstance has been identified during the course of a QIO review. We also are finalizing our proposed technical correction to 42 CFR 476.78(a) to correct a cross-reference. 8. Data Accuracy and Completeness Acknowledgement Requirements for the FY 2012 Payment Determination and Subsequent Years In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25923), we proposed to require hospitals to continue to electronically acknowledge their data accuracy and completeness once annually. However, we proposed to change the submission deadline to be used for the FY 2013 Hospital IQR Program payment determination and subsequent years.35 This proposal will allow us to align the submission deadline with the final quarter of the chart-abstracted measures. Hospitals will continue to submit the required electronic acknowledgment that the data provided to meet the FY 2013 Hospital IQR Program data submission requirements is accurate and complete to the best of the hospital’s knowledge at the time of data submission.36 We proposed to make the submission deadline for the Data Accuracy and Completeness Acknowledgement May 15, 2012 with respect to the time period of January 1, 2011 through December 31, 2011. We invited public comment on this proposal. Comment: A few commenters supported the alignment of the Data 35 In a correction notice published at (76 FR 34633), we corrected an erroneous reference in the proposed rule to the fiscal year for which it proposed to change the submission deadline for the Data Accuracy and Completeness Acknowledgement. The reference to this period in this sentence was changed from FY 2012 to FY 2013. 36 In a correction notice published at (76 FR 34633), we corrected an erroneous reference in the proposed rule to the fiscal year for which it proposed to change the submission deadline for the Data Accuracy and Completeness Acknowledgement. The reference to this period in this sentence was changed from FY 2012 to FY 2013. E:\FR\FM\18AUR2.SGM 18AUR2 51650 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Accuracy and Completeness Acknowledgement with the data submission deadline for the fourth quarter of the chart-abstracted measures. Response: We appreciate the commenters’ support on this proposal. After consideration of the public comments we received, we are adopting the submission deadline for the Data Accuracy and Completeness Acknowledgement of May 15, 2012 with respect to the time period of January 1, 2011 through December 31, 2011. mstockstill on DSK4VPTVN1PROD with RULES2 9. Public Display Requirements for the FY 2014 Payment Determination and Subsequent Years In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25923), we proposed to continue, for the FY 2014 payment determination and subsequent years, the approach we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50230) for public display requirements for the FY 2012 payment determination and subsequent years. The Hospital IQR 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 Web sites. We require that hospitals sign a Notice of Participation form when they first register to participate in the Hospital IQR Program. Once a hospital has submitted a form, the hospital is considered to be an active Hospital IQR 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 us to publicly report the quality measures included in the Hospital IQR 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 invited public comment on this proposal. We did not receive any comments related to this proposal and are, therefore, finalizing it. 10. Reconsideration and Appeal Procedures for the FY 2012 Payment Determination In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25923 through 25925), we proposed to continue, for the FY 2012 payment determination and subsequent years, the general approach we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50230) for reconsideration and appeal procedures for the FY 2011 payment determination. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 We also proposed to codify the requirements under this process at 42 CFR 412.140(e). We discuss each of the regulatory provisions that we proposed, as well as specific changes, below. We proposed that the general deadline for submitting a request for reconsideration in connection with the FY 2012 payment determination will be 30 days from the date of receipt of the payment determination notification. Historically, most reconsideration requests are based on the failure to meet established data submission deadlines. While we want to ensure that hospitals have an opportunity to request reconsiderations when warranted, we also need to balance this goal with our need to complete the reconsideration process in a timely manner and with the hospitals’ desire to obtain final decisions on their requests in a timely manner. Therefore, we proposed to reduce the reconsideration and appeal period from a deadline of November 1st 2012 to 30 days after hospital receipt of the payment determination notification. Notifications will be sent via a trackable mail option such as certified U.S. mail or registered mail. We include this change in the proposed § 412.140(e)(1). 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 2012 payment determination, we proposed to continue utilizing many of the same procedures that we used for the FY 2011 requests for reconsideration. However, we clarified that a hospital must submit all documentation and evidence that supports its request for reconsideration at the time that it submits its request. This includes copies of any communications, such as e-mails that the hospital believes demonstrate its compliance with the program requirements, as well as all paper medical records that support the hospital’s rationale for seeking reconsideration. The information that must be included when a hospital submits a reconsideration request has been listed in proposed § 412.140(e)(2). 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). PO 00000 Frm 00176 Fmt 4701 Sfmt 4700 —Hospital basis for requesting reconsideration. This must identify the hospital’s specific reason(s) for believing it met the Hospital IQR Program requirements and should receive the full update to the standardized amount. —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 note that to the extent a hospital can submit a request for reconsideration on-line, the burden on our staff would be 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 Hospital IQR 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 proposed to post the address where hospitals can ship the paper charts on the QualityNet Web site after we issue the FY 2012 IPPS/LTCH PPS final rule. Hospitals submitting a Hospital IQR Program validation reconsideration request will have all data elements to be reconsidered reviewed by CMS, and not their State QIO. (The State QIO is available to conduct a quarterly validation appeal if requested to do so by a hospital.) 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, a hospital that submits a reconsideration request to CMS must receive a decision on that request prior to submitting a PRRB appeal. We believe that the reconsideration process is less costly for E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations both CMS and hospitals, and that it decreases the number of PRRB appeals by resolving issues earlier in the reconsideration and appeals process. We proposed language at § 412.140(e)(3) stating that a hospital that receives an adverse decision on its reconsideration request may appeal that decision to the PRRB. 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 receipt of the reconsideration request. We proposed to continue for the FY 2012 Hospital IQR Program reconsideration and future years the scope of review when a hospital requests reconsideration because it failed our validation requirements, which we adopted in the FY 2010 IPPS/ RY 2010 LTCH PPS final rule (74 FR 43892). The scope of this review 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. Only hospitals that fail to meet the passing threshold for the quarterly validation would receive an opportunity to appeal the validation results to their State QIO. 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 the medical record submitted by the hospital. 3. Hospital requests reconsideration for medical records not submitted to the CDAC contractor within the proposed 30 calendar day deadline. Our review will initially be limited to determining whether the CDAC contractor received the requested record within the proposed 30 calendar days, and whether the hospital received the initial medical record request. If we determine during reconsideration that the CDAC contractor did receive a paper copy of the requested medical record within the proposed 30 calendar days, then we would abstract data elements from the medical record submitted by the hospital. If we determine that the hospital received a request for medical records and did not submit the requested records within the proposed 30 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 CMS contractor. Please note that this proposed language is also designed to address those instances where the hospital’s request is based on ‘‘invalid record selections,’’ which we have defined as medical records submitted during the quarterly validation process that do not match the patient’s episode of care information as determined by the CMS contractor as described above in situation 2, above ‘‘Hospital requests reconsideration for medical record copies submitted during the quarterly validation process and classified as invalid record selections.’’ In sum, we proposed to continue to initially limit 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 CMS contractor during the quarterly validation process. We would 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. PO 00000 Frm 00177 Fmt 4701 Sfmt 4700 51651 If a hospital is dissatisfied with the result of a Hospital IQR Program reconsideration decision, the hospital may file an appeal under 42 CFR Part 405, Subpart R (a PRRB appeal). We invited public comment on the extent to which these proposed procedures will be less costly for hospitals, and whether they will lead to fewer PRRB appeals. Comment: Several commenters supported CMS’ proposal to reduce the timeframe for appeals from November 1st to 30 days from the date of receipt of the payment determination notification because it would shorten the reconsideration and appeals process, thereby allowing hospitals who successfully appeal CMS’ decision to receive their full annual payment update in a more expedited manner. Response: We agree and appreciate the commenters support for this proposal. Comment: One commenter opposed the proposal to shorten the timeframe and argued that because many hospitals may decide to retain an attorney for a reconsideration request, and because of the time it takes to coordinate an appeal with an attorney, the deadline should remain at November 1 annually. Response: We appreciate the commenter’s input regarding the time necessary to coordinate a reconsideration request. However, we believe that hospitals will have adequate time to evaluate whether to request reconsideration under this proposal and that the benefits of a faster reconsideration process outweigh any potential inconvenience to hospitals. In summary, we thank the commenters for their input. We believe our reconsideration process, including the proposed shorter timeframe for requesting reconsideration, is minimally burdensome. The form for reconsiderations and a detailed description of the reconsideration process are available at https:// qualitynet.org >Hospitals-Inpatient> APU Reconsideration. After consideration of the public comments we received, we are finalizing the reconsideration process we proposed, including the proposal that the general deadline for submitting a request for reconsideration in connection with the FY 2012 payment determination will be 30 days from the date of receipt of the payment determination notification. 11. Hospital IQR Program Disaster Waivers In our experience, there have been times when hospitals have been unable to submit required quality data due to extraordinary circumstances that are not E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51652 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations within their control. It is our goal to not penalize hospitals for such circumstances or unduly increase their burden during these times. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25925) we proposed to continue, for the FY 2014 and subsequent years payment determinations, the process we adopted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50225), for hospitals to request and for CMS to grant waivers with respect to the reporting of required quality data when there are extraordinary circumstances beyond the control of the hospital. Under the process, in the event of extraordinary circumstances, such as a natural disaster, 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 would submit to CMS a request form that would 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 Hospital IQR Program data, and a justification for the proposed date. The request form must be signed by the hospital’s CEO. We proposed that a request form must be submitted within 30, rather than 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 proposes to communicate this decision through routine communication channels to hospitals, vendors and QIOs, including but not limited to issuing memos, emails and notices on the QualityNet Web site. We proposed to include an overview of this process in proposed 42 CFR 412.140(c)(2). We invited public comment on this proposal. Comment: One commenter expressed concern with the proposed reduction in the timeframe for submission noting that during truly devastating events, it may take more than 30 days for complete restoration of electronic communication that CMS depends upon to post forms, post notices, and issue emails. The commenter recommended that the waiver process not only be permitted electronically, but also through use of U.S. Postal Service where electronic communications have not been established. Response: We appreciate the commenter’s input and recognize that during truly devastating events complete restoration of electronic communication could take more than 30 days. However, the form can be completed and submitted using the U.S. Postal Service, fax or electronic submission. In addition, a hospital can request the assistance of their State QIO to complete and submit the form. We also note that we may grant an extension or waiver, to hospitals that have not requested them, of one or more submission deadlines in extraordinary circumstances that affect an entire region or locale. Comment: Many commenters stated they had no objections to reducing the timeframe for waiver submissions. Response: We appreciate the commenters’ support for the proposal. After consideration of the public comments we received, we are adopting as final the process that requires that a request form must be submitted within 30, rather than 45, days of the date that the extraordinary circumstance occurred. 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 records) that will allow for reporting of clinical quality data from the EHRs PO 00000 Frm 00178 Fmt 4701 Sfmt 4700 directly to a CMS data repository (70 FR 47420 through 47421). We sought to prepare for future EHR submission of quality measures by sponsoring the creation of electronic specifications for quality measures under consideration for the Hospital IQR Program. b. 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)(iii) 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 Hospital IQR 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. All measures must be proposed for public comment prior to their selection, except in the case of measures previously selected for the Hospital IQR Program under section 1886(b)(3)(B)(viii) of the Act. The final rule for the Medicare and Medicaid EHR Incentive Programs includes 15 clinical quality measures for eligible hospitals and critical access hospitals (75 FR 44418), 2 of which were previously selected for the Hospital IQR Program under section 1886(b)(3)(B)(viii) of the Act. The remaining 13 measures for these incentive programs are being proposed for the Hospital IQR Program for the FY 2015 payment determination. We continue to believe there are important synergies with respect to the two programs. We believe the financial incentives under the HITECH Act for the adoption and meaningful use of certified EHR technology by hospitals will encourage the adoption and use of certified EHRs for the reporting of clinical quality measures under the Hospital IQR Program. Through the EHR Incentive Programs we expect that the submission of quality data through EHRs will provide a foundation for establishing the capacity of hospitals to E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations send, and for CMS to receive, quality measures via hospital EHRs for Hospital IQR Program measures in the future. The HITECH Act requires that the Secretary seek to avoid redundant and duplicative reporting, with specific reference to the Hospital IQR Program for eligible hospitals. To the extent that quality measures are included in both the Hospital IQR Program and the EHR Incentive Programs, this would mean that Hospital IQR Program would need to transition to use of certified EHR technology rather than manual chart abstraction. We are considering what the most practical approach to effect such a transition might be. One option is to select a date after which chartabstracted data would no longer be used in the Hospital IQR Program. This would require sufficient advance notice to hospitals for hospitals to report the data via certified EHR technology. At that point, we believe that it is likely that nearly all IPPS hospitals will have implemented certified EHR technology as incentivized by the HITECH Act. Another option would be to allow hospitals to submit the same measure for the Hospital IQR Program based on either chart-abstraction or EHR-based reporting. This would require extensive testing to ensure equivalence given that the data for the Hospital IQR Program supports both the public reporting of such information and the Hospital VBP Program. We are concerned that this option would not be feasible. We invited public comment on the approach of selecting calendar year 2015 after which chart-abstracted data would no longer be accepted for the Hospital IQR Program. Comment: Many commenters overwhelmingly supported the alignment of Hospital IQR Program measures with the EHR Incentive Programs’ meaningful use criteria for objective/measure. Some commenters recommended that CMS monitor the adoption rate of EHRs in the EHR Incentive Programs in order to gauge a target date for complete transition. A few commenters supported the FY 2015 target date for complete transition from chart-abstraction to EHR-based data collection while several commenters doubted the EHR-readiness of some hospitals and believed that 2020 is probably a more realistic date for a complete transition. A commenter recommended the maintaining chartabstraction for small hospitals which may not be able to afford EHR technology. Response: We thank the commenters for supporting our goal to advance the Hospital IQR Program toward EHRbased reporting. As we state in section VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 IV.A.3.a of this final rule, we anticipate that most hospitals will have the capability to report quality measures electronically by 2015 because of the upcoming payment adjustments for eligible hospitals that do not meet the criteria as meaningful users of certified EHR technology. Comment: Commenters also noted complete electronic measure testing, validation, and comparison of measure outcomes obtained from chartabstraction and electronic specifications are crucial in the transition process. Response: As we move towards alignment and harmonization of clinical quality measures reporting among federal reporting initiatives, we plan to test, compare, and align these reporting specifications to ensure consistency. We thank the commenters for the comments and suggestions and we will take them into account as we develop future proposals regarding the transfer to EHR technology for chart-abstracted records under the Hospital IQR Program. Ultimately, we anticipate that all of the Hospital IQR measures that are chart-abstracted will be e-specified and also included in the EHR Incentive Programs. We envision a single reporting infrastructure for electronic submission of these measures in the future, and will strive to align the hospital quality initiative programs to seek to avoid redundant and duplicative reporting of quality measures for hospitals. We note that some important Hospital IQR Program 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 Hospital IQR Program readmission measures, are based on claims data rather than clinical data. Thus, not all Hospital IQR quality measures will necessarily be capable of being submitted through EHRs. As a consequence, not all Hospital IQR Program measures would necessarily be appropriate for inclusion in the EHR Incentive Programs. We again note that the provisions in this FY 2012 IPPS/LTCH PPS proposed rule do not implicate or implement any HITECH statutory provisions. Those provisions are the subject of separate rulemaking and public comment. B. Hospital Value-Based Purchasing (VBP) Program 1. Background Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which value-based PO 00000 Frm 00179 Fmt 4701 Sfmt 4700 51653 incentive payments are made in a fiscal year to hospitals meeting performance standards established for a performance period for such fiscal year. Both the performance standards and the performance period for a fiscal year are to be established by the Secretary. Section 1886(o)(1)(B) of the Act directs the Secretary to begin making value-based incentive payments under the Hospital VBP Program to hospitals for discharges occurring on or after October 1, 2012. These incentive payments will be funded for FY 2013 through a reduction to the FY 2013 base operating MS–DRG payment for each discharge of 1 percent, as required by section 1886(o)(7)(B)(i) of the Act. Section 1886(o)(1)(C) of the Act provides that the Hospital VBP Program applies to subsection (d) hospitals (as defined in section 1886(d)(1)(B) of the Act), but excludes from the definition of the term ‘‘hospital,’’ with respect to a fiscal year: (1) A hospital that is subject to the payment reduction under section 1886(b)(3)(B)(viii)(I) of the Act (the Hospital IQR Program) for such fiscal year; (2) a hospital for which, during the performance period for the fiscal year, the Secretary cited deficiencies that pose immediate jeopardy to the health or safety of patients; and (3) a hospital for which there are not a minimum number (as determined by the Secretary) of measures for the performance period for the fiscal year involved, or for which there are not a minimum number (as determined by the Secretary) of cases for the measures that apply to the hospital for the performance period for such fiscal year. 2. Overview of the Hospital Inpatient VBP Program On April 29, 2011, we issued the Hospital Inpatient VBP Program final rule to implement section 1886(o) of the Act (76 FR 26490, May 6, 2011). As described more fully in the Hospital Inpatient VBP Program final rule, we adopted for the FY 2013 Hospital VBP Program 13 measures that we have already adopted for the Hospital IQR Program, categorized into two domains (76 FR 26495 through 26511). We grouped 12 clinical process of care measures into a clinical process of care domain, and placed the HCAHPS survey measure into a patient experience of care domain. We adopted a 3-quarter performance period from July 1, 2011 through March 31, 2012 for these measures (76 FR 26494 through 26495). To determine whether a hospital meets the proposed performance standards for these measures, we will compare each hospital’s performance during this performance period to its performance E:\FR\FM\18AUR2.SGM 18AUR2 51654 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations during a 3-quarter baseline period from July 1, 2009 through March 31, 2010 (76 FR 26493 through 26495). We also finalized a methodology for assessing the total performance of each hospital based on performance standards under which we will score each hospital based on achievement and improvement ranges for each applicable measure. We will calculate a Total Performance Score for each hospital by combining the greater of the hospital’s achievement or improvement points for each measure to determine a score for each domain, weighting each domain score (for the FY 2013 Hospital VBP Program, the weights will be clinical process of care = 70 percent, patient experience of care = 30 percent), and adding together the weighted domain scores. We will convert each hospital’s Total Performance Score into a valuebased incentive payment using a linear exchange function. We refer readers to the Hospital Inpatient VBP Program final rule for further explanation of the details of the FY 2013 Hospital VBP Program (76 FR 26490 through 26547). For FY 2014, we also adopted in the Hospital Inpatient VBP Program final rule 13 outcome measures comprised of 3 mortality measures, 2 AHRQ composite measures, and 8 hospitalacquired condition (HAC) measures (76 FR 26511). These measures are set forth below. FINALIZED OUTCOME MEASURES FOR THE FY 2014 HOSPITAL VBP PROGRAM Mortality Measures (Medicare Patients) ........... AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs) Composite Measures. Hospital Acquired Condition Measures ............ mstockstill on DSK4VPTVN1PROD with RULES2 3. Additional FY 2014 Hospital VBP Program Measure a. Background Section 1886(o)(2)(A) of the Act requires the Secretary to select for the Hospital VBP Program measures, other than readmission measures, from the measures specified under section 1886(b)(3)(B)(viii) of the Act for the Hospital IQR Program. Section 1886(o)(2)(B)(i) of the Act requires the Secretary, with respect to value-based incentive payments made for discharges occurring during FY 2013, to ensure that the selected measures cover at least the following specified conditions or topics: Acute Myocardial Infarction (AMI); Heart Failure (HF); Pneumonia (PN); Surgeries, as measured by the Surgical Care Improvement Project (SCIP); Healthcare-Associated Infections (HAIs), as measured by the prevention metrics and targets established in the HHS Action Plan to Prevent HAIs (available at: https://www.hhs.gov/ash/initiatives/ hai/actionplan/) (or any successor plan); and HCAHPS. Section 1886(o)(2)(B)(ii) of the Act requires the Secretary, with respect to value-based incentive payments made for discharges occurring during FY 2014 or a subsequent year, to ensure that Hospital VBP Program measures include efficiency measures, including measures of Medicare spending per beneficiary. Section 1886(o)(2)(C)(i) of the Act provides that the Secretary may not VerDate Mar<15>2010 19:46 Aug 17, 2011 Jkt 223001 • • • • • Acute Myocardial Infarction (AMI) 30-day mortality rate. Heart Failure (HF) 30-day mortality rate. Pneumonia (PN) 30-day mortality rate. Complication/patient safety for selected indicators (composite). Mortality for selected medical conditions (composite). • • • • • 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 Urinary Tract Infection (UTI). • Manifestations of Poor Glycemic Control. select a measure with respect to a performance period for a fiscal year unless the measure has been specified under the Hospital IQR Program and included on the Hospital Compare Web site for at least one year prior to the beginning of the performance period. Section 1886(o)(2)(C)(ii) of the Act provides that a measure selected under section 1886(o)(2)(A) of the Act shall not apply to a hospital if the hospital does not furnish services appropriate to the measure. b. Efficiency Measure—Medicare Spending Per Beneficiary Measure—for the FY 2014 Hospital VBP Program (1) Introduction Section 1886(o)(2)(B)(ii) of the Act requires the Secretary to ensure that, for Hospital VBP discharges occurring during FY 2014 or a subsequent year, the measures selected ‘‘include efficiency measures, including measures of ‘Medicare spending per beneficiary’ * * *.’’ Therefore, for the FY 2014 Hospital VBP Program, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25927 through 25928), we proposed to adopt a Medicare spending per beneficiary measure. We also proposed this measure for inclusion in the Hospital IQR Program in the proposed rule and we described it in detail in section IV.A.3.b.(2)(B) of the proposed rule (76 FR 25896 through 25897). Our proposed and final approaches to PO 00000 Frm 00180 Fmt 4701 Sfmt 4700 scoring this measure and including it in the Hospital VBP Program are discussed below. (2) Scoring the Medicare Spending per Beneficiary Measure Section 1886(o)(5)(B)(ii) of the Act requires that the hospital performance score be determined using the higher of its achievement or improvement score for each measure. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25927 through 25928), we proposed to calculate each hospital’s achievement score and improvement score on the proposed Medicare spending per beneficiary measure, in order to determine which score will be used to calculate the Total Performance Score for the hospital. We proposed this scoring methodology because it is generally similar to the methodology proposed for scoring the clinical process of care and outcome measures in the Hospital Inpatient VBP Program proposed rule (76 FR 2465 through 2471). (A) Scoring Based on Achievement We proposed to calculate a Medicare per beneficiary spending ratio of the Medicare spending per beneficiary amount for each hospital to the median Medicare spending per beneficiary amount across all hospitals during the performance period. We proposed that a hospital would earn between 1 and 10 achievement points on the Medicare E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 spending per beneficiary measure if its individual Medicare spending per beneficiary ratio during the performance period falls at or between the achievement threshold and the achievement benchmark for the measure. We proposed to set the achievement threshold at the median Medicare spending per beneficiary ratio across all hospitals during the performance period. We proposed to set the benchmark at the mean of the lowest decile of Medicare spending per beneficiary ratios during the performance period. We proposed that a hospital whose individual Medicare spending per beneficiary ratio fell below the achievement threshold would score 0 achievement points on the measure, and that a hospital whose individual Medicare spending per beneficiary ratio falls at or above the achievement benchmark would score the maximum of 10 achievement points on the measure. We have clarified the scoring language, as detailed below, to indicate that a hospital whose Medicare spending per beneficiary ratio falls above the achievement threshold would not score achievement points, because a lower ratio, within the achievement range, results in higher points on this measure. We also provided a narrative formula to illustrate the proposed calculation of achievement points, which we have clarified below. (B) Scoring Based on Improvement In the FY 2012 IPPS/LTCH PPS proposed rule 76 FR 25927 through 25928), we proposed that a hospital would earn between 1 and 9 improvement points on the proposed Medicare spending per beneficiary measure if its individual Medicare spending per beneficiary ratio during the performance period falls within the improvement range. We proposed to set the threshold for improvement at the hospital’s own Medicare spending per beneficiary ratio, as calculated during the baseline period. We proposed a baseline period of May 15, 2010 through February 14, 2011 for the Medicare spending per beneficiary measure and discussed this proposal in section IV.B.3.b.(4) of the preamble of the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25928). We proposed that the improvement benchmark would be equal to the achievement benchmark for the performance period, which is the mean of the lowest decile of Medicare spending per beneficiary ratios across all hospitals. We proposed that a hospital whose Medicare spending per beneficiary ratio is equal to or lower than its baseline period Medicare spending per beneficiary ratio would VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 score 0 improvement points on the measure We have clarified the scoring language, as detailed below, to indicate that a hospital whose Medicare spending per beneficiary ratio falls above the improvement threshold (the hospital’s own Medicare spending per beneficiary during the baseline period) would not score improvement points, because a lower ratio, within the improvement range, results in higher points on this measure. Comment: Several commenters suggested that the narrative scoring examples included in the proposed rule were incorrect, because they were similar to those used for scoring other quality measures. The commenters believed the formulas did not apply to the spending per beneficiary measure. One commenter noted that the scoring process description should be clarified to indicate that a lower Medicare spending per beneficiary ratio would result in a higher score on the measure than would a higher Medicare spending per beneficiary ratio. Response: We disagree that the narrative scoring examples were incorrect. However, we agree that it would be beneficial to clarify the examples, for consistency with the numeric examples. The narrative examples in the proposed rule appeared in a different order than the numeric examples, resulting in a negative number being divided by a negative number and yielding a positive number. The numeric examples result in a positive number being divided by a positive number, which is again a positive number. In this final rule, we are clarifying the narrative examples. We are clarifying the description of the scoring process to indicate that a lower Medicare spending per beneficiary ratio would result in a higher score on the measure, if it falls within the achievement or improvement range, as suggested by a commenter. Comment: One commenter requested clarification of the purpose of calculating a ratio to the median spending amount rather than giving consideration to the distribution of scores, and suggested evaluating the distribution of scores by geographic region. Response: The purpose of using a ratio in the Medicare spending per beneficiary measure is to quantify a hospital’s individual Medicare spending per beneficiary amount, as compared to spending nationally. The use of a ratio also facilitates our comparison of a hospital’s baseline Medicare spending per beneficiary, relative to national Medicare spending per beneficiary, during the baseline period, to the PO 00000 Frm 00181 Fmt 4701 Sfmt 4700 51655 hospital’s performance period Medicare spending per beneficiary, relative to the national Medicare spending per beneficiary during the performance period. We believe that comparison of standardized Medicare spending per beneficiary ratios on a national level is the best way to help hospitals understand where opportunities for improved efficiencies lie. After considering all public comments on scoring of the Medicare spending per beneficiary measure, we are finalizing our proposal that a hospital will earn between 1 and 10 achievement points on the Medicare spending per beneficiary measure if its individual Medicare spending per beneficiary ratio during the performance period falls at or between the achievement threshold and the achievement benchmark for the measure. We are finalizing the achievement threshold at the median Medicare spending per beneficiary ratio across all hospitals during the performance period. We are finalizing the benchmark at the mean of the lowest decile of Medicare spending per beneficiary ratios during the performance period. A hospital whose individual Medicare spending per beneficiary ratio falls above the achievement threshold will score 0 achievement points on the measure, and a hospital whose individual Medicare spending per beneficiary ratio falls at or below the achievement benchmark will score the maximum of 10 achievement points on the measure. A hospital whose individual Medicare spending per beneficiary ratio falls at or below the achievement threshold, but above the benchmark, will score between 1 and 9 points according to the following formula: [9 * ((achievement threshold ¥ Hospital’s performance period Medicare spending per beneficiary ratio)/(achievement threshold ¥ benchmark))] + .5 We are finalizing our proposal that a hospital will earn between 1 and 9 improvement points on the proposed Medicare spending per beneficiary measure if its individual Medicare spending per beneficiary ratio during the performance period falls within the improvement range. We are finalizing the threshold for improvement at the hospital’s own Medicare spending per beneficiary ratio, as calculated during the baseline period. We are finalizing the baseline period of May 15, 2010 through February 14, 2011 for the Medicare spending per beneficiary measure. We are finalizing that the improvement benchmark would be equal to the achievement benchmark for E:\FR\FM\18AUR2.SGM 18AUR2 51656 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations the performance period, which is the mean of the lowest decile of Medicare spending per beneficiary ratios across all hospitals. A hospital whose Medicare spending per beneficiary ratio is equal to or higher than its baseline period Medicare spending per beneficiary ratio will score 0 improvement points on the measure. If a hospital’s score on the measure during the performance period is less than its baseline period score but above the benchmark (within the improvement range), the hospital will receive a score of 0–9 according to the following formula: [10 * ((Hospital baseline period Medicare spending per beneficiary ratio ¥ Hospital performance period Medicare spending per beneficiary ratio)/(Hospital baseline period Medicare spending per beneficiary ratio ¥ Benchmark)] ¥ .5 mstockstill on DSK4VPTVN1PROD with RULES2 (C) Example of Scoring the Medicare Spending per Beneficiary Measure In the proposed rule, we provided the following numeric example of scoring this measure: If Hospital A had the following spending per beneficiary amounts during the baseline and performance period: Baseline = $10,105 Performance = $9,125; and the median spending per beneficiary amounts across all hospitals for the baseline and performance periods were: Median Baseline = $11,672 Median Performance = $12,467; then the Medicare spending per beneficiary ratios for Hospital A in the baseline and performance periods would be: Baseline Ratio = 0.866 Performance Ratio = 0.732. The achievement threshold is the median ratio across all hospitals, which would be 1.0. In this example, we assume a benchmark of 0.712. We would calculate achievement and improvement points for Hospital A as follows: Achievement Points = 9 * (1.0 ¥ 0.732) / (1.0 ¥ 0.712) + 0.5 = 8.868 Improvement Points = 10 * (0.866 ¥ 0.732) / (0.866 ¥ 0.712) ¥ 0.5 = 8.185 These points are rounded to yield 9 attainment points and 8 improvement points. Because section 1886(o)(5)(B)(ii) of the Act, as added by section 3001 of the Affordable Care Act, requires that the hospital performance score will be VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 determined using the higher of attainment or improvement score for each measure, the hospital in this example would receive 9 points on the Medicare spending per beneficiary measure. Comment: One commenter stated that the scoring example was correct. Response: We agree that this example is correct, and we have clarified the narrative formulas, for consistency with this example, as suggested by other commenters. (D) Incorporation of Medicare Spending Per Beneficiary Measure Score into the Overall Hospital Total Performance Score In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25928), we proposed to incorporate the Medicare spending per beneficiary measure score into the FY 2014 Hospital VBP Program as part of a new domain: the ‘‘Efficiency’’ domain. The Medicare spending per beneficiary measure score would be the Efficiency domain score for purposes of the FY 2014 Hospital VBP Program. Consistent with the domain scoring method in the Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547), we proposed to determine the total earned points for the Efficiency domain in general by adding the points earned for each domain measure and dividing by the total possible points, then multiplying that number by 100 percent. However, because we proposed to adopt only one measure for the Efficiency domain for the FY 2014 Hospital VBP Program, the total points earned for the domain would be the points earned on the Medicare spending per beneficiary measure. We proposed that the total possible points that a hospital could earn for the Efficiency domain for FY 2014 would be 10, which is equal to the total possible points that the hospital could earn for the Medicare spending per beneficiary measure. We proposed that the Efficiency domain percentage score would be calculated for FY 2014 as follows: Efficiency domain score = Total points earned on the Medicare spending per beneficiary measure divided by 10, then multiplied by 100 percent. Once the Efficiency domain score has been determined, we proposed to assign it a weight for use in the calculation of the Total Performance Score. We proposed FY 2014 domain weighting, additional FY 2014 measures, and other proposals for the FY 2014 Hospital VBP Program in the CY 2012 OPPS/ASC proposed rule (76 FR 42354 through 42365). PO 00000 Frm 00182 Fmt 4701 Sfmt 4700 Comment: Two commenters requested clarification of the proposed weighting of the Efficiency domain. Response: We proposed to weight the Efficiency domain at 20 percent in the CY 2012 OPPS/ASC proposed rule (76 FR 42362 through 42363). After considering the public comments we received on the proposals for incorporation of Medicare spending per beneficiary measure score into the overall hospital Total Performance Score, we are finalizing our proposal to incorporate the Medicare spending per beneficiary measure score into the FY 2014 Hospital VBP Program as part of a new domain: The ‘‘Efficiency’’ domain. We are finalizing that the Medicare spending per beneficiary measure score will be the Efficiency domain score for purposes of the FY 2014 Hospital VBP Program. We are finalizing our proposal to determine the total earned points for the Efficiency domain by adding the points earned for each domain measure and dividing by the total possible points, then multiplying that number by 100 percent. For the FY 2014 payment adjustment, there is only 1 measure in the Efficiency domain, the Medicare spending per beneficiary measure, and the total possible points are 10. We are finalizing that the Efficiency domain percentage score would be calculated for FY 2014 as follows: Efficiency domain score = Total points earned on the Medicare spending per beneficiary measure divided by 10, then multiplied by 100 percent. We are finalizing our proposal to assign a weight to the Efficiency domain, for use in the calculation of the Total Performance Score. We note that we proposed FY 2014 domain weighting, additional FY 2014 measures, and other proposals for the FY 2014 Hospital VBP Program in the CY 2012 OPPS/ASC proposed rule (76 FR 42354 through 42365). 4. Efficiency Domain (Medicare Spending per Beneficiary Measure) Performance Period and Baseline Period Section 1886(o)(2)(C)(i) of the Act prohibits the Secretary from selecting a measure for the Hospital VBP Program with respect to a performance period unless it has been specified under the Hospital IQR Program and included on the Hospital Compare Web site for at least 1 year prior to the beginning of such performance period. Section 1886(o)(8) of the Act requires that hospitals be notified of the calculation of their value-based incentive payment no later than 60 days prior to the fiscal year involved. In order to comply with these statutory requirements for the FY 2014 Hospital VBP Program, in the FY E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 2012 IPPS/LTCH PPS proposed rule (76 FR 25928), we proposed to adopt a 9month period of performance from May 15, 2012 through February 14, 2013 for the proposed Medicare spending per beneficiary measure. If the measure is adopted, this would allow for a 1-year display period on Hospital Compare, a 60-day notification period, and would allow the time needed for administrative processes. We noted that this would have meant that only IPPS discharges occurring from May 15, 2012 through 90 days prior to February 14, 2013 would count as index stays for purposes of creating the Medicare spending per beneficiary episodes. This was because, as proposed, the Medicare spending per beneficiary measure would have included a Medicare spending per beneficiary episode spanning from 3 days prior to admission through 90-days post-discharge. However, we have finalized a shorter Medicare spending per beneficiary episode, which spans from 3 days prior to admission through 30 days postdischarge. Therefore, discharges occurring within 30 days of the end of the performance period will be counted as index admissions, as described in section IV.A.3.b.(2)(B) of this final rule. The Medicare spending per beneficiary episode is described in section IV.A.3.b.(2)(B) of the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25896 through 25897), and in section IV.A.3.b.(2)(B) of this final rule. For the purposes of calculating improvement points on the proposed Medicare spending per beneficiary measure, it is necessary to establish the baseline period to which the performance period score will be compared. For purposes of the FY 2014 Hospital VBP Program, we proposed to adopt a baseline period of May 15, 2010 through 90 days prior to February 14, 2011 for this proposed measure. This proposal was intended to indicate that only discharges occurring 90 days prior to the end of the performance period would be counted as index admissions, because, as proposed, the Medicare spending per beneficiary measure would have included a Medicare spending per beneficiary episode spanning from 3 days prior to admission through 90-days post-discharge. However, we have finalized a shorter Medicare spending per beneficiary episode, which spans from 3 days prior to admission through 30 days postdischarge. Therefore, discharges occurring within 30 days of the end of the baseline period will be counted as index admissions, as described in section IV.A.3.b.(2)(B) of this final rule. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 The proposed baseline period is consistent with the baseline period that has been proposed for the FY 2013 clinical process of care and patient experience of care measures in the Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547) because it precedes the performance period by 2 years. We invited public comment on all of our proposals related to the Efficiency Domain and Medicare spending per beneficiary measure. Comment: A large number of commenters addressed the proposed period of performance for the Medicare spending per beneficiary measure. All but one of those commenters stated that implementation should be delayed. Most commenters stated that the Medicare spending per beneficiary measure was not posted on Hospital Compare in time to meet the requirement of the Affordable Care Act that it be displayed there for 1 year prior to the start of the performance period and that therefore, CMS must choose another performance period for the measure. A number of commenters specifically noted the language in section 3001 of the Affordable Care Act requiring measures of Medicare spending per beneficiary be included in the calculation of value-based incentive payments made for discharges occurring during fiscal year 2014 or a subsequent fiscal year. Nine commenters stated that the measure should be delayed pending the outcome of NQF study or endorsement. A few commenters stated that the measure should be delayed until results of IOM work can be incorporated, and several commenters suggested that CMS wait for the outcome of its GROUPER study. A few commenters stated that implementation should be delayed so that further analysis and testing should be performed. One commenter stated that the performance period was inappropriate, because it precedes the payment year, making it impossible for hospitals to improve performance during the payment year. That commenter further questioned the association of a baseline year with the performance year. A few commenters suggested that the Medicare spending per beneficiary measure should utilize a 12-month performance period, similar to other VBP measures. One commenter stated that the proposed period of performance should be implemented without revision. Response: We disagree with comments that this measure was not included on Hospital Compare in a timely manner. The measure was included on April 21, 2011, which is PO 00000 Frm 00183 Fmt 4701 Sfmt 4700 51657 more than 1 year before the proposed performance period start date of May 15, 2012. We disagree with comments that we should use the Affordable Care Act language regarding inclusion of a Medicare spending per beneficiary measure for discharges occurring in ‘‘a subsequent fiscal year’’ to delay the implementation of this measure. We believe that the Medicare spending per beneficiary measure is an important step in encouraging hospitals to redesign and coordinate care with other providers and suppliers of care, and that its timely implementation is critical to incentivizing hospitals to provide the highest-quality, most efficient care possible to Medicare beneficiaries. We acknowledge that movement toward consistency in performance periods across Hospital VBP Program measures, to the extent possible, is an important goal. However we note that some measures within the Hospital VBP Program, including the Medicare spending per beneficiary measure, cannot initially have 12-month periods of performance, due to statutory constraints on display and notification timeframes. In order to implement this measure for FY 2014, and to display it on Hospital Compare for 1 year prior to the start of the performance period, as required by statute, a 9-month period of performance is the longest we are able to implement for the FY 2014 payment adjustment. We note that all hospitals will have the same 9-month performance period during which their Medicare spending per beneficiary ratios will be compared. Therefore, we do not believe that any hospital will be unfairly disadvantaged by this performance period. We will analyze and consider the possibility of moving to a 12-month period of performance for the Medicare spending per beneficiary measure in the future. In response to the comment which questions the use of a performance period which precedes the payment adjustment year, we note that the section 1886(o)(4) of the Act, as added by section 3001 of the Affordable Care Act requires that the performance period for a fiscal year begin and end prior to the beginning of that fiscal year. Section 1886(o)(5)(B)(ii) of the Act, as added by section 3001(a) of the Affordable Care Act, requires that the hospital performance score be determined using the higher of achievement or improvement points, and we believe that the use of a baseline period is the best means of comparison, in order to determine how much hospitals have improved on this measure and calculate improvement E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51658 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations points. We disagree with comments in favor of delaying the implementation of the Medicare spending per beneficiary measure for further refinement or endorsement. We believe that the measure provides an accurate comparison of hospital-specific Medicare spending per beneficiary. We intend to perform ongoing analysis of this measure, in order to continually improve it, but we believe that its prompt implementation is an important step in ensuring that Medicare beneficiaries receive high-quality, coordinated, and efficient care. We appreciate the commenter’s support for the implementation of this measure as proposed. Comment: A few commenters stated that the measure could first be implemented for public reporting purposes, but not be attributed to specific hospitals. Another commenter suggested that CMS could implement the measure by first publishing spending on a per-region basis. Response: As stated above, we believe that the Medicare spending per beneficiary measure is an important step in encouraging hospitals to redesign and coordinate care with other providers and suppliers of care, and that its prompt implementation is critical to incentivizing hospitals to provide the highest-quality, most efficient care possible to Medicare beneficiaries. This measure would be incorporated as one component of the hospital’s Total Performance Score for the Hospital VBP Program. In summary, after consideration of the public comments we received, we are finalizing the following proposals, with regard to inclusion of the Medicare spending per beneficiary measure in the FY 2014 Hospital VBP Program. We are finalizing our proposal to include of the Medicare spending per beneficiary measure in the FY 2014 Hospital VBP Program. We are finalizing our proposal that a hospital will earn between 1 and 10 achievement points on the Medicare spending per beneficiary measure if its individual Medicare spending per beneficiary ratio during the performance period falls at or between the achievement threshold and the achievement benchmark for the measure. We are finalizing the achievement threshold at the median Medicare spending per beneficiary ratio across all hospitals during the performance period. We are finalizing the benchmark at the mean of the lowest decile of Medicare spending per beneficiary ratios during the performance period. A hospital whose individual Medicare spending per beneficiary ratio falls above the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 achievement threshold will score 0 achievement points on the measure, and a hospital whose individual Medicare spending per beneficiary ratio falls at or below the achievement benchmark will score the maximum of 10 achievement points on the measure. A hospital whose individual Medicare spending per beneficiary ratio falls at or below the achievement threshold, but above the benchmark, will score between 1–9 points according to the following formula: [9 * ((achievement thresholdHospital’s performance period Medicare spending per beneficiary ratio)/ (achievement threshold-benchmark))] + 0.5. We are finalizing our proposal that a hospital will earn between 1 and 9 improvement points on the proposed Medicare spending per beneficiary measure if its individual Medicare spending per beneficiary ratio during the performance period falls within the improvement range. We are finalizing the threshold for improvement at the hospital’s own Medicare spending per beneficiary ratio, as calculated during the baseline period. We are finalizing the baseline period of May 15, 2010 through February 14, 2011 for the Medicare spending per beneficiary measure. We are finalizing the improvement benchmark would be equal to the achievement benchmark for the performance period, which is the mean of the lowest decile of Medicare spending per beneficiary ratios across all hospitals. A hospital whose Medicare spending per beneficiary ratio is equal to or higher than its baseline period Medicare spending per beneficiary ratio will score 0 improvement points on the measure. If a hospital’s score on the measure during the performance period is less than its baseline period score but above the benchmark (within the improvement range), the hospital will receive a score of 0–9 according to the following formula: [10 * ((Hospital baseline period Medicare spending per beneficiary ratio¥Hospital performance period Medicare spending per beneficiary ratio)/(Hospital baseline period Medicare spending per beneficiary ratio¥Benchmark)]¥0.5. We are finalizing our proposal to incorporate the Medicare spending per beneficiary measure score into the FY 2014 Hospital VBP Program as part of a new domain: the ‘‘Efficiency’’ domain. We are finalizing that the Medicare spending per beneficiary measure score will be the Efficiency domain score for purposes of the FY 2014 Hospital VBP Program. We are finalizing our proposal PO 00000 Frm 00184 Fmt 4701 Sfmt 4700 to determine the total earned points for the Efficiency domain by adding the points earned for each domain measure and dividing by the total possible points, then multiplying that number by 100 percent. For the FY 2014 payment adjustment, there is only 1 measure in the Efficiency domain, the Medicare spending per beneficiary measure, and the total possible points are 10. We are finalizing that the Efficiency domain percentage score would be calculated for FY 2014 as follows: Efficiency domain score = Total points earned on the Medicare spending per beneficiary measure divided by 10, then multiplied by 100 percent. We are finalizing our proposal to assign a weight to the Efficiency domain, for use in the calculation of the Total Performance Score. We note that we proposed FY 2014 domain weighting, additional FY 2014 measures, and other proposals for the FY 2014 Hospital VBP Program in the CY 2012 OPPS/ASC proposed rule (76 FR 42354 through 42365). We are finalizing a 9-month period of performance from May 15, 2012 through February 14, 2013 for the Medicare spending per beneficiary measure. We are finalizing a 9-month baseline period of May 15, 2010 through February 14, 2011. We are finalizing that only discharges occurring within 30 days of the end of the baseline period will be counted as index admissions for the purposes of establishing baseline period Medicare spending per beneficiary episodes. 5. Simultaneous Specification of Additional Measures for the Hospital VBP Program and the Hospital IQR Program In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25928), we proposed to simultaneously specify additional measures for the Hospital VBP Program and the Hospital IQR Program, as appropriate, for use in both programs. Our rationale is to improve patient safety and quality of care in an expedited manner that is compliant with applicable statutory guidance. We noted that we used this approach in the FY 2012 IPPS/LTCH PPS proposed rule by proposing to add the Medicare spending per beneficiary measure to both the Hospital VBP and Hospital IQR Programs. We also stated that we would provide all associated regulatory impact and policy rationale in future proposals for both programs. We stated our belief that this proposal notifies stakeholders through rulemaking and welcomed comments on this proposal. Comment: Several commenters objected to the proposal to E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations simultaneously adopt measures for both the Hospital VBP Program and the Hospital IQR Program. The commenters believed that such an approach is inconsistent with section 1886(o)(2)(C)(i) of the Act, because they believed that CMS is statutorily required to add measures to the Hospital VBP Program only if they are specified under the Hospital IQR Program and included on the Hospital Compare Web site for at least one year prior to the beginning of the Hospital VBP performance period that applies for the fiscal year. Response: We believe that our proposal is consistent with section 1886(o)(2)(C)(i) of the Act. That provision prohibits the Secretary from selecting a measure for the Hospital VBP Program unless the measure ‘‘has been specified under the Hospital IQR Program and included on the Hospital Compare Web site for at least one year prior to the beginning of the applicable performance period.’’ This provision does not require that a measure be specified for the Hospital IQR Program before it is included on the Hospital Compare Web site, nor does it require that we include on the Hospital Compare Web site performance data on the measure prior to selecting the measure for the Hospital VBP Program. We believe that by including measures on Hospital Compare, we are providing the public with sufficient notice that we might choose to select any or all of them for the Hospital IQR Program measure set and, possibly simultaneously, for the Hospital VBP Program measure set (provided the performance period for these measures begins at least one year after their initial Hospital Compare inclusion and other statutory requirements are met). Comment: Some commenters supported CMS’ proposal to simultaneously specify measures in the Hospital IQR and Hospital VBP Programs. Some commenters generally supported the alignment of Hospital IQR Program and Hospital VBP Program measures. Response: We appreciate the commenters’ support of our proposal. We believe that this policy will enable us to expand the measure set as quickly as possible. We note that we intend to provide as much notice as is feasibly possible before proposing to select any measure for the Hospital VBP Program. However, as we stated in the proposed rule, one of our main goals is to adopt measures as expeditiously as possible for the purpose of improving patient safety and the quality of care. After consideration of the public comments received, we are finalizing our proposal to adopt a policy VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 under which we can simultaneously propose to adopt measures for use in both the Hospital IQR and Hospital VBP Programs. 6. Responses to Additional Hospital VBP Program Comments We received additional comments regarding other aspects of the Hospital VBP Program for which we did not make proposals in the FY 2012 IPPS/ LTCH PPS proposed rule. We offer the following clarifications and references in response to these comments. Comment: Several commenters stated that the performance period for the 8 HAC measures adopted for the FY 2014 Hospital VBP Program is incorrect because the measures were not displayed on Hospital Compare on March 3, 2011. These commenters further suggest that CMS must select a new performance period to meet the statutory requirements. Response: We disagree with commenters’ assertion that we must change the performance period for these measures. The 8 finalized HAC measures were first included on Hospital Compare on March 3, 2011 in the ‘‘Highlights’’ section and the Hospital Compare ‘‘Glossary.’’ We believe that this display meets the requirement in section 1886(o)(2)(C)(i) that measures be included on the Hospital Compare Web site for at least one year prior to the beginning of the performance period that applies to the FY 2014 Hospital VBP Program. As stated in the Hospital Inpatient VBP Program final rule (76 FR 26495), the FY 2014 performance period for the 8 finalized HAC measures will begin on March 3, 2012. Comment: Some commenters opposed the use of HAC measures in the Hospital VBP Program, and argued that hospitals will be penalized on those measures under two separate payment policies. Response: As we stated in the Hospital Inpatient VBP Program final rule, we view the Hospital VBP Program and the program authorized under section 3008 of the Affordable Care Act as related but separate efforts to reduce HACs. We intend to monitor the various interactions of programs authorized by the Affordable Care Act and their overall impact on providers and suppliers (76 FR 26504). Comment: Some commenters suggested that CMS change the finalized domain weighting scheme for the FY 2013 Hospital VBP Program and weight all domains equally, arguing that doing so would help ‘‘bend the cost curve’’ and create a more equitable payment system. Other commenters expressed specific concern with the patient PO 00000 Frm 00185 Fmt 4701 Sfmt 4700 51659 experience domain’s weighting at 30 percent, arguing that cultural, regional, and educational differences can affect a patient’s perspective of care. Response: We disagree with the comments’ suggestions that we alter the domain weighting scheme we finalized for the FY 2013 Hospital VBP Program. As we explained in the Hospital Inpatient VBP Program final rule (76 FR 26526), we considered many factors when determining the appropriate weight for the FY 2013 Hospital VBP Program, including the number of measures in each domain, the reliability of individual measure data, systematic effects of alternative weighting schemes on hospitals according to their location and characteristics, and HHS quality improvement priorities. We also believe that delivery of high-quality, patientcentered care requires us to carefully consider the patient’s experience in the hospital inpatient setting. Taking all of these considerations into account, we finalized the use of a 70 percent clinical process of care and 30 percent patient experience of care (HCAHPS) weighting scheme for the FY 2013 Hospital VBP Program. We believe that assigning a 30 percent weight to the patient experience of care domain is appropriate because the HCAHPS measure is comprised of eight dimensions that address different aspects of patient satisfaction. We believe the finalized 30 percent weight appropriately balances hospitals’ incentives to perform well on both the clinical process measures and the HCAHPS survey. We also refer readers to the CY 2012 OPPS/ASC proposed rule (76 FR 42362 through 76 FR 42363) for our proposed weighting scheme for the FY 2014 Hospital VBP Program. We adopted a number of HCAHPS dimensions for the FY 2013 Hospital VBP Program that assess the patient’s communication experience with hospital staff (including doctors and nurses), and communication regarding medicines and discharge information. We believe that the communication experience of all patients is a critical aspect of quality of care, and one that should be measured and publicly reported for all hospitals. Accordingly, the communication items have been an integral part of HCAHPS since its national implementation in 2006, have been included in the Hospital IQR Program since 2007, have been publicly reported since 2008, and have been adopted in the Hospital VBP Program in a manner that rewards hospitals for either their performance compared to other hospitals, or their improvement E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51660 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations compared to their own previous performance. Comment: One commenter argued that because urban safety net hospitals typically serve a diverse patient population, these hospitals are likely to score poorly on the communication dimensions of the HCAHPS survey, and that for this reason, the use of HCAHPS in the Hospital VBP Program would be detrimental to them. Several commenters stated that CMS should distinguish safety net and urban safety net hospitals from other hospitals because of the distinct challenges faced by such hospitals and because such hospitals are disadvantaged by the Hospital VBP Program, particularly the HCAHPS domain. Response: We thank the commenters for their input. As we discussed in the Hospital Inpatient VBP Program final rule (76 FR 26502), we recognize that urban hospitals, particularly large ones, have historically not performed as well on HCAHPS as rural hospitals. However, our internal studies of HCAHPS results show that hospitals in some urban areas scored in the top 25 percent of hospitals overall. We believe that those results suggest that urban hospitals can achieve high scores under the HCAHPS domain. ‘‘Safety net’’ hospital is not an official CMS term or category. However, we are aware of several differing definitions of this term. Employing a definition of ‘‘Safety Net hospital’’ created by the AHRQ, we looked into the ability of safety net hospitals to score well on HCAHPS in the Hospital VBP Program. We found 30 hospitals that meet all three of AHRQ’s criteria for Safety Net hospital: (1) high Medicaid percentage; (2) high percentage of uncompensated care; and (3) located in a high poverty county. Of these 30 hospitals, 3 hospitals (10 percent) fall in the top 10 percent of all hospitals in terms of projected earned total HCAHPS points for the Hospital VBP Program. This suggests that safety net hospitals can achieve the highest HCAHPS Hospital VBP Program scores and at a similar rate to non-safety net hospitals. Comment: One commenter requested that CMS publicly report the patient mix characteristics of each hospital, and publicly report the non-patient-mix adjusted HCAHPS scores to allow hospitals to determine the impact of patient-mix adjustment in Hospital VBP Program payments. Response: We thank the commenter for the suggestion. We currently provide patient-mix adjustment coefficients for HCAHPS measures on our HCAHPS OnLine Web site, https:// www.hcahpsonline.org, along with VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 instructions on how hospitals can derive the adjustments that apply to their scores. We will consider the benefits of publicly reporting the patient mix characteristics and the pre- and post-patient-mix adjusted HCAHPS scores of participating hospitals. C. Hospital Readmissions Reduction Program 1. Background a. Overview CMS is committed to promoting high quality health care and improving patient health outcomes. Readmission to a hospital may be an adverse event for patients and many times imposes a financial burden on the health care system. Successful efforts to reduce preventable readmission rates will improve quality of care while simultaneously decreasing costs. Hospitals can work with their communities to lower readmission rates and improve patient care in a number of ways, such as ensuring patients are clinically ready to be discharged, reducing infection risk, reconciling medications, improving communication with community providers responsible for post-discharge patient care, improving care transitions, and ensuring that patients understand their care plans upon discharge. Many studies have demonstrated the effectiveness of these types of inhospital and post-discharge interventions in reducing the risk of readmission, confirming that hospitals and their partners have the ability to lower readmission rates.37 38 39 These types of efforts taken during and after a hospitalization have been shown to be effective in reducing readmission rates in geriatric populations generally,40 41 as well as for multiple specific conditions. Moreover, such interventions can be cost saving. For example, in the case of 37 Gwadry-Sridhar FH, Flintoft V, Lee DS, Lee H, Guyatt GH: A systematic review and meta-analysis of studies comparing readmission rates and mortality rates in patients with heart failure. Arch Intern Med. 2004;164(21):2315–2320. 38 McAlister FA, Lawson FM, Teo KK, Armstrong PW.: A systematic review of randomized trials of disease management programs in heart failure. AmJMed. 2001;110(5):378–384. 39 Krumholz HM, Amatruda J, Smith GL, et al.: Randomized trial of an education and support intervention to prevent readmission of patients with heart failure. J Am Coll Cardiol. 2002;39(1):83–89. 40 Coleman EA, Parry C, Chalmers S, Min SJ.: The care transitions intervention: Results of a randomized controlled trial. Arch Intern Med. 2006;166:1822–8. 41 Naylor MD, Brooten D, Campbell R, Jacobsen BS, Mezey MD, Pauly MV, Schwartz JS.: Comprehensive discharge planning and home follow-up of hospitalized elders: A randomized clinical trial. JAMA. 1999;281:613–20. PO 00000 Frm 00186 Fmt 4701 Sfmt 4700 heart failure, improved hospital 42 and post-discharge care,43 44 including predischarge planning,45 46 home-based follow-up, and patient education,47 48 have been shown to lower heart failure readmission rates, suggesting that heart failure readmission rates might be reduced if proven interventions were more widely adopted. Financial incentives to reduce readmissions will in turn promote improvement in care transitions and care coordination, as these are important means of reducing preventable readmissions.49 In its 2007 ‘‘Report to Congress: Promoting Better Efficiency in Medicare,’’ 50 MedPAC noted the potential benefit to patients of lowering readmissions and suggested payment strategies that would incentivize hospitals to reduce these rates. MedPAC identified 7 conditions and procedures that accounted for almost 30 percent of potentially preventable readmissions: Heart failure; chronic obstructive pulmonary disease; pneumonia; acute myocardial infarction; coronary artery bypass graft surgery; percutaneous transluminal coronary angioplasty; and other vascular procedures. To promote quality of care, CMS developed hospital quality of care 42 Gwadry-Sridhar FH, Flintoft V, Lee DS, Lee H, Guyatt GH.: A systematic review and meta-analysis of studies comparing readmission rates and mortality rates in patients with heart failure. Arch Intern Med. 2004;164(21):2315–2320. 43 Lappe JM, Muhlestein JB, Lappe´ DL, et al.: Improvements in 1-year cardiovascular clinical outcomes associated with a hospital-based discharge medication program. Ann Intern Med. 2004;141(6):446–453. 44 Phillips CO, Wright SM, Kern DE, Singa RM, Shepperd S, Rubin HR.: Comprehensive discharge planning with postdischarge support for older patients with congestive heart failure: A metaanalysis [published correction appears in JAMA. 2004;292(9):1022]. JAMA. 2004;291(11): 1358–1367. 45 Rich MW, Beckham V, Wittenberg C, Leven CL, Freedland KE, Carney RM.: A multi disciplinary intervention to prevent the readmission of elderly patients with congestive heart failure. N Engl J Med. 1995;333(18):1190–1195. 46 Schneider JK, Hornberger S, Booker J, Davis A, Kralicek R.: A medication discharge planning program: Measuring the effect on readmissions. Clin Nurs Res. 1993;2(1):41–53. 47 Koelling TM, Johnson ML, Cody RJ, Aaronson KD.: Discharge education improves clinical outcomes in patients with chronic heart failure. Circulation. 2005;111(2):179–185. 48 Krumholz HM, Amatruda J, Smith GL, et al.: Randomized trial of an education and support intervention to prevent readmission of patients with heart failure. J Am Coll Cardiol. 2002;39(1):83–89. 49 Coleman EA.: 2005. Background Paper on Transitional Care Performance Measurement. Appendix I. In: Institute of Medicine, Performance Measurement: Accelerating Improvement. Washington, DC: National Academy Press. 50 Medicare Payment Advisory Commission (MedPAC). Report to Congress: Promoting Greater Efficiency in Medicare; 2007. Available at https:// www.medpac.gov/documents/ Jun07_EntireReport.pdf. Accessed January 10, 2011. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations measures that compare patient outcomes across different hospitals. These measures, including hospital riskstandardized readmission measures for Acute Myocardial Infarction (AMI), Heart Failure (HF) and Pneumonia (PN), were originally developed for public reporting as a part of the Hospital IQR Program. We adopted the HF readmission measure for the Hospital IQR Program in the FY 2009 IPPS final rule for the FY 2010 payment determination (73 FR 48606) and the AMI and PN readmission measures in the CY 2009 OPPS/ASC final rule with comment period for the FY 2010 payment determination (73 FR 68781). Details about the methodology used for these measures may be found on the Web site at: https://www.qualitynet.org/ dcs/ContentServer?c=Page&pagename= QnetPublic%2FPage%2FQnetTier4& cid=1219069855841. As described above, readmission rates are important markers of quality of care, particularly of the care of a patient in transition from an acute care setting to a non-acute care setting, and improving readmissions can positively influence patient outcomes and the cost of care. The above hospital risk-standardized readmission measures are endorsed by the National Quality Forum (NQF) and have been publicly reported on Hospital Compare Web site since 2009 (https:// www.hospitalcompare.hhs.gov) to encourage quality improvement and lower readmission rates. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25928 through 25937), we proposed that the readmission measures for these three conditions be used for the Hospital Readmissions Reduction Program under section 1886(q) of the Act, as added by section 3025 of the Affordable Care Act. Below is a discussion of the proposals we included regarding these measures, the public comments we received regarding these proposals, our response to these public comments, and our final policy decisions. mstockstill on DSK4VPTVN1PROD with RULES2 b. Statutory Basis for the Hospital Readmissions Reduction Program Section 3025 of the Affordable Care Act, as amended by section 10309 of the Affordable Care Act, added a new subsection (q) to section 1886 of the Act. Section 1886(q) of the Act establishes the ‘‘Hospital Readmissions Reduction Program’’ effective for discharges from an ‘‘applicable hospital’’ beginning on or after October 1, 2012, under which payments to those hospitals under section 1886(d) of the Act will be reduced to account for certain excess readmissions. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 In this year’s IPPS rulemaking, we address: (i) Those aspects of the Hospital Readmissions Reduction Program that relate to the conditions and readmissions to which the Hospital Readmissions Reduction Program will apply for the first program year beginning October 1, 2012; (ii) the readmission measures and related methodology used for those measures, as well as the calculation of the readmission rates; and (iii) public reporting of the readmission data. Specific information regarding the payment adjustment required under section 1886(q) of the Act will be proposed in next year’s IPPS/LTCH PPS proposed rule. Although we did not propose specific policies regarding the payment adjustment under the Hospital Readmissions Reduction Program in the FY 2012 IPPS/LTCH PPS proposed rule, we believe that it is still important to set forth the general framework of the Hospital Readmissions Reduction Program, including the payment adjustment provisions, in order for the public to understand how the measures discussed and finalized in this rulemaking will affect certain hospital payments beginning in FY 2013. Section 1886(q)(1) of the Act sets forth the methodology by which payments to ‘‘applicable hospitals’’ will be adjusted to account for excess readmissions. Pursuant to section 1886(q)(1) of the Act, payments for discharges from an ‘‘applicable hospital’’ will be an amount equal to the product of the ‘‘base operating DRG payment amount’’ and the adjustment factor for the hospital for the fiscal year. That is, the ‘‘base operating DRG payments’’ are reduced by an adjustment factor that accounts for excess readmissions. Section 1886(q)(1) of the Act requires the Secretary to make payments for a discharge in an amount equal to the product of ‘‘the base operating DRG payment amount’’ and ‘‘the adjustment factor’’ for the hospital in a given fiscal year. Section 1886(q)(2) of the Act defines the base operating DRG payment amount as ‘‘the payment amount that would otherwise be made under subsection (d) (determined without regard to subsection (o) [the Hospital VBP Program]) for a discharge if this subsection did not apply; reduced by * * * any portion of such payment amount that is attributable to payments under paragraphs (5)(A), (5)(B), (5)(F), and (12) of subsection (d).’’ Paragraphs (5)(A), (5)(B), (5)(F), and (12) of subsection(d) refer to outlier payments, IME payments, DSH payments, and payments for low volume hospitals, respectively. PO 00000 Frm 00187 Fmt 4701 Sfmt 4700 51661 Furthermore, section 1886(q)(2)(B) of the Act specifies special rules for defining ‘‘the payment amount that would otherwise be made under subsection (d)’’ for certain hospitals. Specifically, section 1886(q)(2)(B) of the Act states that ‘‘[i]n the case of a Medicare-dependent, small rural hospital (with respect to discharges occurring during fiscal years 2012 and 2013) or a sole community hospital * * * the payment amount that would otherwise be made under subsection (d) shall be determined without regard to subparagraphs (I) and (L) of subsection (b)(3) and subparagraphs (D) and (G) of subsection (d)(5).’’ We intend to propose regulations to implement the statutory provisions related to the definition of ‘‘base operating DRG payment amount’’ in the FY 2013 IPPS/LTCH PPS proposed rule. Section 1886(q)(3)(A) of the Act defines the ‘‘adjustment factor’’ for an applicable hospital for a fiscal year as equal to the greater of ‘‘(i) the ratio described in subparagraph (B) for the hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or (ii) the floor adjustment factor specified in subparagraph (C).’’ Section 1886(q)(3)(B) of the Act in turn describes the ratio used to calculate the adjustment factor. It states that the ratio is ‘‘equal to 1 minus the ratio of—(i) the aggregate payments for excess readmissions * * *; and (ii) the aggregate payments for all discharges * * *.’’ Section 1886(q)(3)(C) of the Act describes the floor adjustment factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal years. Section 1886(q)(4) of the Act sets forth the definitions of ‘‘aggregate payments for excess readmissions’’ and ‘‘aggregate payments for all discharges’’ for an applicable hospital for the applicable period. The term ‘‘aggregate payments for excess readmissions’’ is defined in section 1886(q)(4)(A) of the Act as ‘‘the sum, for applicable conditions * * * of the product, for each applicable condition, of (i) the base operating DRG payment amount for such hospital for such applicable period for such condition; (ii) the number of admissions for such condition for such hospital for such applicable period; and (iii) the ‘‘Excess Readmission Ratio * * * for such hospital for such applicable period minus 1.’’ The ‘‘Excess Readmission Ratio’’ is a hospital-specific ratio based on each applicable condition. Specifically, section 1886(q)(4)(C) of the Act defines the Excess Readmission Ratio as the ratio of ‘‘risk-adjusted readmissions based on actual readmissions’’ for an applicable hospital E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51662 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations for each applicable condition, to the ‘‘risk-adjusted expected readmissions’’ for the applicable hospital for the applicable condition. Section 1886(q)(5) of the Act provides definitions of ‘‘applicable condition,’’ ‘‘expansion of applicable conditions,’’ ‘‘applicable hospital,’’ ‘‘applicable period,’’ and ‘‘readmission.’’ The term ‘‘applicable condition,’’ which we addressed in detail below in section IV.C.3.a. of this preamble, is defined as a ‘‘condition or procedure selected by the Secretary among conditions and procedures for which: (i) Readmissions * * * represent conditions or procedures that are high volume or high expenditures * * * and (ii) measures of such readmissions * * * have been endorsed by the entity with a contract under section 1890(a) * * * and such endorsed measures have exclusions for readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital).’’ The term ‘‘expansion of the applicable condition’’ refers to the Secretary’s authority, beginning with FY 2015, ‘‘to the extent practicable, [to] expand the applicable conditions beyond the 3 conditions for which measures have been endorsed * * * to the additional 4 conditions that have been identified by the Medicare Payment Advisory Commission in its report to Congress in June 2007 and to other conditions and procedures as determined appropriate by the Secretary.’’ Section 1886(q)(5)(C) of the Act defines ‘‘applicable hospital,’’ that is, a hospital subject to the Hospital Readmissions Reduction Program, as a ‘‘subsection (d) hospital or a hospital that is paid under section 1814(b)(3) [of the Act], as the case may be.’’ The term ‘‘applicable period,’’ as defined by section 1886(q)(5)(D) of the Act, ‘‘means, with respect to a fiscal year, such period as the Secretary shall specify.’’ As explained in the FY 2012 IPPS/LTCH PPS proposed rule and in this final rule, the ‘‘applicable period’’ is the period from which data are collected in order to calculate various ratios and adjustments under the Hospital Readmissions Reduction Program. Section 1886(q)(6) of the Act sets forth the reporting requirements for hospitalspecific readmission rates. Section 1886(q)(7) of the Act limits administrative and judicial review of certain determinations made pursuant to section 1886(q) of the Act. Finally, section 1886(q)(8) of the Act requires the Secretary to collect data on readmission rates for all hospital inpatients for ‘‘specified hospitals’’ in VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 order to calculate the hospital-specific readmission rates for all hospital inpatients and to publicly report these readmission rates. 2. Implementation of the Hospital Readmissions Reduction Program a. Overview We intend to implement the requirements of the Hospital Readmissions Reduction Program in the FY 2012, FY 2013, and future IPPS/ LTCH PPS rulemaking cycles. Comment: A few commenters supported CMS’ implementation of the Hospital Readmissions Reduction Program and CMS’s implementation approach. One commenter specifically appreciated the phased-in approach for implementation. Response: We appreciate the commenters’ support for the Hospital Readmissions Reduction Program and the phased-in approach we have taken. Comment: Some commenters urged that, prior to next year’s rulemaking in which CMS will discuss and implement the provisions related to the payment adjustment and other outstanding issues, CMS hold a series of stakeholder calls to solicit input in the development of the Hospital Readmissions Reduction Program. Response: We appreciate the comments on our implementation process of the Hospital Readmissions Reduction Program. We intend to solicit formal public input on our proposal related to the readmissions reduction through rulemaking. In addition, the public can provide input on proposals related to the Hospital Readmissions Reduction Program through the Hospital Open Door Forums calls that we hold periodically to provide hospitals with information on various issues and to listen to questions and concerns from hospitals. The public can find out more information about the Hospital Open Door Forums, including when they will be held, on the CMS Web site: https:// www.cms.gov/OpenDoorForums/18_ ODF_Hospitals.asp#TopOfPage. Comment: One commenter expressed concern that the Hospital Readmissions Reduction Program’s payment adjustments are likely to have a disproportionate impact on rural hospitals. Response: We appreciate the comment on the impact of the Hospital Readmissions Reduction Program on rural hospitals. We note that we did not propose policies related to the Hospital Readmissions Reduction Program payment adjustment in the proposed rule. Therefore, this comment is outside the scope of the issues addressed in the PO 00000 Frm 00188 Fmt 4701 Sfmt 4700 proposed rule. As discussed in more detail below, we plan to propose policies related to the implementation of the payment adjustment set forth in section 1886(q) of the Act in the FY 2013 IPPS/LTCH PPS proposed rule. We will consider this comment when formulating these policies. Comment: One commenter stated that the simultaneous implementation of the readmissions reduction measures for AMI, HF, and PN in the Hospital Readmissions Reduction Program and the Hospital IQR Program would cause ‘‘double jeopardy,’’ that is, the hospital would be penalized twice for care provided to the same patients. Response: While the readmissions measures that we proposed for the Hospital Readmissions Reduction Program are also part of the Hospital IQR Program, hospitals are not assessed under the Hospital IQR Program based on their performance on the measures. Rather, under the Hospital IQR Program, hospitals are only required to participate in the program and to report the measure in order to avoid a payment reduction, regardless of their performance on the reported measures. Moreover, the readmission measures included in the Hospital IQR Program are not eligible to be included in the Hospital VBP Program. In the case of the three proposed NQF-endorsed 30-day risk standardized readmissions measures for AMI, HF, and PN, no additional information is required of hospitals because we use information that is already submitted on Medicare Part A and Part B claims for payment purposes. The Hospital Readmissions Reduction Program includes a payment adjustment based on the hospital’s performance with regard to the claimsbased readmissions measures. Therefore, in this situation, we do not believe hospitals will be penalized twice based on the same readmissions measures. However, we intend to monitor any potential interactions that the Hospital Readmissions Reduction Program may have with other programs. We anticipate implementing the readmissions payment adjustment through future rulemaking. Comment: One commenter expressed concern about a number of potential unintended consequences that could result from the Hospital Readmissions Reduction Program, including premature discharge of patients, providers avoiding certain types of patients who are more ill or complicated and therefore likely to be readmitted. Another commenter suggested that the Hospital Readmissions Reduction Program resulted in increased pressure on emergency physicians not to readmit E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations patients within the 30-day window. This commenter also expressed concerns that physicians in emergency departments do not have access to the patient’s record if they have had a recent inpatient stay at another hospital. Response: We appreciate the commenters pointing out these potential unintended consequences of the Hospital Readmissions Reduction Program. As part of our implementation of the Hospital Readmissions Reduction Program, we will monitor trends to determine if there are unintended consequences of the policy, such as systematic shifting, diversion, and delays in care, in order to assess and take appropriate action to minimize any such unintended consequences. Comment: One commenter stated that it is important to ensure that transplant centers are not unduly penalized by the Hospital Readmissions Reduction Program, when transplant patients are readmitted for infections caused by the transplantation of organs from marginal donors. Response: The three applicable conditions for readmission measures only apply to patients discharged with a primary diagnosis code for AMI, HF, and PN, and do not apply to transplant patients who have contracted infections from the transplantation of infected organs. Therefore, patient admissions for transplants and corresponding discharges with those primary codes are not included in the index hospitalizations counted for these measures. However, if a transplant recipient is subsequently admitted with AMI, HF or PN and is readmitted within 30 days, the readmission would be included in the readmissions methodology. Therefore, we do not believe that transplant centers would be disproportionately penalized by the Hospital Readmissions Reduction Program. Comment: One commenter stated that it is important for hospitals to be able to track patients who are subsequently admitted to other hospitals and requested that CMS develop patient identifiers that would allow for this tracking. Two commenters stated that hospitals need a mechanism to track and understand patient readmissions in real time. Response: We recognize the value in being able to track patients’ readmissions to other hospitals real time both for a hospital’s internal quality improvement purpose, and for validating our readmission measure criteria. We thank the commenters for their suggestions, and we will consider whether it is operationally possible to provide these data to hospitals and VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 whether sharing these data would be consistent with patient privacy considerations. Comment: One commenter recommended that CMS provide hospitals with their expected readmission ratio and actual readmission counts on a quarterly basis, as well as claims data for the prior 12 months for any readmission attributed to them. Response: To provide the measures quarterly, including the expected readmission rates and the actual counts of readmissions, is resource intensive. We thank the commenters for their suggestions and will consider them if resources allow us to do so in the future. The readmission measures are calculated using the data from the claims that hospitals submitted to CMS for payment. Therefore, hospitals should have access to at least their own facility’s patient claims data for the prior 12 months for any readmission attributed to them. We thank the commenters for these suggestions. We will consider whether it is operationally possible to provide hospitals with these measures quarterly and the patient data for any readmission attributed to the hospitals. In addition we will look into whether sharing these patient data would be consistent with patient privacy considerations. Comment: Two commenters requested that data be made available to advocacy and watchdog organizations so that the proposed measures can be replicated and validated independently prior to the end of the comment period. One commenter recommended that CMS’ calculations, including its methodology for all risk adjustments and how it calculates hospital-specific observed and expected rates be made available to the public so that CMS’ work can be replicated and verified. Response: We have made the methodology reports for risk-adjusting the proposed measures and the software (in SAS format) to calculate the measures publicly available through https://www.Qualitynet.org. However, because of the comparative nature inherent to the calculating the measures, we note that the statistical models used to calculate the measures require data from all applicable hospitals, and cannot be replicated using only a single hospital’s data. With regard to providing data to advocacy and watchdog groups for independent validation, we have provided the downloadable files on the Hospital Compare Web site. The downloadable files contain the aggregate-level data that we publicly reported. As we noted above, we will consider whether it is operationally PO 00000 Frm 00189 Fmt 4701 Sfmt 4700 51663 possible to provide additional data to third parties and whether sharing these data would be consistent with patient privacy considerations. b. Provisions in the FY 2012 IPPS/LTCH PPS Final Rule As explained above, the adjustment factor set forth in section 1886(q) of the Act does not apply to discharges until FY 2013. Therefore, we are able to implement the Hospital Readmissions Reduction Program over two years. We are first addressing issues such as the selection of readmission measures and the calculation of the Excess Readmission Ratio, which will then be used, in part, to calculate the readmission payment adjustment factor. Specifically, in the FY 2012 IPPS/LTCH PPS proposed rule and in this final rule, we addressed portions of section 1886(q) of the Act related to the following provisions: • Selection of applicable conditions; • Definition of ‘‘readmission;’’ • Measures for the applicable conditions chosen for readmission; • Methodology for calculating the Excess Readmission Ratio; • Public reporting of the readmission data; and • Definition of ‘‘applicable period.’’ With respect to the topics of ‘‘measures for readmission’’ for the applicable conditions, and ‘‘methodology for calculating the Excess Readmission Ratio,’’ we are specifically addressing the following: • Index hospitalizations; • Risk Adjustment; • Risk Standardized Readmission Rate; • Data sources; and • Exclusion of Certain Readmissions. c. Provisions To Be Included in the FY 2013 IPPS/LTCH PPS Proposed Rule In the FY 2013 IPPS/LTCH PPS rulemaking, we will address the provisions in section 1886(q) of the Act that are related to the payment adjustment, as well as the rest of the provisions in section 1886(q) of the Act that are not addressed in the FY 2012 IPPS/LTCH PPS rulemaking. Specifically, in the FY 2013 IPPS/LTCH PPS proposed rule, we plan to address section 1886(q) of the Act related to the following provisions: • Base operating DRG payment amount, including policies for SCHs and MDHs; • Adjustment factor (both the ratio and floor adjustment factor); • Aggregate payments for excess readmissions; • Applicable hospital. We believe it is appropriate to first address the readmission measures and E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51664 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations the calculation of the Excess Readmission Ratio that will be used, in part, to calculate the readmission payment adjustment factor and the application of the readmission payment adjustment factor to inpatient hospital payments. We believe the 2-year rulemaking schedule provides adequate time and opportunities for careful consideration of the various aspects of the Hospital Readmissions Reduction Program by both CMS and stakeholders prior to implementation of the Hospital Readmissions Reduction Program in FY 2013. Comment: One commenter asked that cancer hospitals payment based on limits set by the Tax Equity and Fiscal Responsibility Act of 1982 be exempt from the Hospital Readmissions Reduction Program. Response: We appreciate the comment, but we note that this comment is not within the scope of the proposals in the FY 2012 IPPS/LTCH PPS proposed rule regarding the Hospital Readmissions Reduction Program. In the proposed rule, we noted that we plan to address the provisions of section 1886(q)(5)(C) of the Act related to the definition of ‘‘applicable hospital’’ in the FY 2013 IPPS/LTCH PPS proposed rule. Comment: Several comments addressed the payment adjustment under section 1886(q) of the Act. One commenter expressed appreciation that the readmission payment adjustment factor would not be applied to Medicare DSH, IME, or outlier payments. Some commenters believed that the readmission payment adjustment factor should only be applied to discharges following readmissions and not all discharges. Other commenters believed that the formula set forth in the statute to calculate the aggregate payments due to excess readmissions would result in a payment penalty that is too severe. Commenters also stated that the formula to calculate the aggregate payments due to excess readmissions should be the product of the Excess Readmission Ratio, the average base DRG operating payment, and the expected number of readmissions, rather than the current statutory language that defines aggregate payments for excess readmissions as the product of the total number of admissions for the condition, the average base DRG payment for the condition, and the Excess Readmission Ratio. Commenters also stated that the statutory formula is inconsistent and combines quantities that are not comparable because the Excess Readmission Ratio is based on the ratio of risk-adjusted actual readmissions to VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 risk-adjusted expected readmissions and that ratio, which is based on readmissions, is applied to the total number of admissions. Commenters believed that the statutory formula is contrary to Congressional intent, because the monetary savings if the formula were implemented consistent with the statute is far greater than the CBO score of the provision. Commenters suggested that CMS adopt a less literal and rigid interpretation of the statute or seek a technical amendment to the law. Response: We appreciate the comments on the readmission payment adjustment factor, but we again note that we did not propose policies related to the Hospital Readmissions Reduction Program payment adjustment in the proposed rule. Therefore, these comments are not within the scope of issues discussed in the FY 2012 IPPS/ LTCH PPS proposed rule. We will consider these comments when formulating policies related to the Hospital Readmissions Reduction Program payment adjustment in next year’s IPPS/LTCH PPS rulemaking. d. Expansion of the Applicable Conditions To Be Included in the Future Rulemaking Pursuant to section 1886(q)(5)(B) of the Act, beginning in FY 2015, the Secretary ‘‘shall, to the extent practicable,’’ expand the list of applicable conditions for the Hospital Readmissions Reduction Program beyond the three conditions described in section 1886(q)(5)(A) of the Act to include additional conditions that have been identified by MedPAC as high cost or high volume in its 2007 Report to Congress, as well as other conditions as determined appropriate by the Secretary. We plan to implement this provision of the Hospital Readmissions Reduction Program in future rulemaking. Comment: A few commenters expressed support for the future expansion of applicable conditions for the Hospital Readmissions Reduction Program. One commenter requested that CMS consider some often undertreated clinical conditions that commonly afflict hospital patients (such as disorders associated with abnormal sodium level). Some commenters urged CMS to provide details about expansion of the applicable conditions soon so that they can begin interventions to improve readmissions for these conditions. Response: We appreciate the commenters’ support and their proactive approach to reduce hospital readmissions. We will take these suggestions into account as we continue to implement the Hospital Readmissions PO 00000 Frm 00190 Fmt 4701 Sfmt 4700 Reduction Program in the future. We plan to consider the remaining four conditions that accounted for almost 12 percent of potentially preventable readmissions as identified by the MedPAC in its 2007 ‘‘Report to Congress’’ as well as other conditions as determined appropriate by the Secretary.51 Comment: One commenter stated that complying with the Hospital Readmissions Reduction Program measure requirements and concurrently undergoing the adoption of EHR technology is overwhelming. The commenter requested delaying the expansion of applicable conditions until after 2015, when the EHR transition is projected to be complete. Response: We appreciate the commenter’s concerns. The Secretary is authorized under section 1886(q)(5)(B) of the Act to expand the list of applicable conditions beginning in FY 2015. Therefore, we believe hospitals would have sufficient time to prepare to address both the HITECH EHR Incentive Program and the Hospital Readmissions Reduction Program. We will collaborate with stakeholders to assess the impact of expanding the list of applicable conditions as 2015 approaches. Comment: Another commenter suggested that, if CMS were to adopt the Healthcare Associated Infection (HAI) measure of Clostridium Difficile infection proposed for the Hospital IQR Program, it should consider adopting a readmission measure for Clostridium Difficile infection for the Hospital Readmissions Reduction Program for FY 2013 or a subsequent year because doing so would help to achieve the goals of the HHS Action Plan to Prevent HAIs. Response: We appreciate the commenter’s suggestion. However, we want to clarify that there is currently no NQF-endorsed readmission measure that covers the condition of Clostridium Difficile infection that could have been considered as an applicable condition for FY 2013. For the FY 2013 payment determination for the Hospital Readmissions Reduction Program, we are required to adopt NQF-endorsed measures for the high cost/high expenditure conditions that are selected. For the Hospital IQR Program, we proposed and are finalizing the clostridium Difficile infection measure that was listed among the targeted metrics in the HHS Action Plan to Prevent HAIs, and we believe that doing 51 Medicare Payment Advisory Commission (MedPAC). Report to Congress: Promoting Greater Efficiency in Medicare; 2007. Available at https:// www.medpac.gov/documents/ Jun07_EntireReport.pdf. Accessed January 10, 2011. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations so will further the goals of the Action Plan. In the future, should this condition meet the statutory criteria and should a readmission measure for the condition be established that also meets the statutory criteria, we will consider it for future expansion of the Hospital Readmissions Reduction Program in accordance with the applicable condition requirements set forth in section 1886(q)(5) of the Act. mstockstill on DSK4VPTVN1PROD with RULES2 3. Provisions for the Hospital Readmissions Reduction Program a. Applicable Conditions for the FY 2013 Hospital Readmissions Reduction Program Section 1886(q) of the Act sets forth payment adjustments for applicable hospitals to account for excess readmissions, for applicable conditions, that are high volume or high expenditure, in the hospital. These payment adjustments are determined based on the occurrence of readmissions for ‘‘applicable conditions.’’ When selecting ‘‘applicable conditions,’’ the Secretary must select among conditions and procedures for which (1) readmissions are ‘‘high volume or high expenditure’’; and (2) ‘‘measures of such readmissions’’ have been endorsed by the entity with a contract under section 1890(a) of the Act’’ (currently NQF) and (3) such endorsed measures have exclusions for readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital).’’ Consistent with these requirements, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25931), we proposed to include AMI, HF, and PN as ‘‘applicable conditions’’ for the FY 2013 Hospital Readmissions Reduction Program. As set forth below, we believe these conditions meet the criteria for ‘‘applicable conditions’’ under section 1886(q)(5)(A) of the Act. We also note that in MedPAC’s 2007 Report to Congress that we discussed in section IV.C.1.a. of this preamble, MedPAC listed three conditions (AMI, HF, and PN) as priorities for hospital-specific public reporting of readmission rates. With regards to the first criterion, that readmissions of ‘‘applicable conditions’’ be ‘‘high volume or high expenditure,’’ MedPAC identified AMI, HF, and PN as being among the seven conditions and procedures associated with approximately 30 percent of potentially preventable readmissions, based on an 3M analysis conducted for MedPAC of 2005 MedPAR (Medicare FFS hospital claims). Of these seven conditions and procedures, HF and PN were the highest in terms of volume and expenditures. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 In addition, in our analysis of the 235 diagnostic categories for hospitalization based on 2008 Medicare hospital claims data, HF and PN were first and second, respectively, as the most frequent diagnostic category for both total admissions and total readmissions. AMI was ninth among the 235 conditions in terms of frequency of admission and 8th in frequency of readmission. Therefore, we believe that AMI, HF and PN consitute high volume and high expenditure conditions particularly as this term relates to hospital admission and readmission. With regards to the second criterion, we believe that measures of readmissions for these applicable conditions also meet the statutory requirements. Section 1886(q)(5)(A)(ii) of the Act requires that each ‘‘applicable condition’’ have ‘‘measures of readmissions’’ that ‘‘(I) have been endorsed by the entity with a contract under section 1890(a) [of the Act]; and (II) such endorsed measures have exclusions for readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital).’’ As discussed in section IV.C.3.c. of this preamble, we believe selecting AMI, HF, and PN as ‘‘applicable conditions’’ is consistent with this statutory requirement. The NQF (the entity with a contract under section 1890(a) of the Act) has endorsed ‘‘measures of readmissions’’ for each of these three conditions, and those NQF-endorsed measures ‘‘have exclusions for readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital).’’ We believe AMI, HF, and PN meet both prongs of the definition of ‘‘applicable condition.’’ Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to include AMI, HF, and PN as ‘‘applicable conditions’’ for the Hospital Readmissions Reduction Program for FY 2013. We invited public comment on this proposal. Comment: One commenter encouraged CMS to carefully review and address the selection of applicable conditions. One commenter urged CMS to exercise caution in implementing financial incentives to reduce readmission of patients for pneumonia and COPD because of the clinical variability and uncertainty involving the effectiveness of interventions for such patients. Response: We note that we did not propose a COPD-based measure in the FY 2012 IPPS/LTCH PPS proposed rule, but we will take the comment into consideration should we consider PO 00000 Frm 00191 Fmt 4701 Sfmt 4700 51665 proposing COPD as an applicable condition in future rulemaking. In the case of pneumonia, we note that studies suggest optimal care for pneumonia during the index hospitalization may reduce the risk of subsequent readmission.52 53 Furthermore, as we discussed above, pneumonia meets all of the statutory criteria to be included as a readmissions measure for the Hospital Readmissions Reduction Program for FY 2013. As we discussed in the proposed rule, we believe the three applicable conditions that we have selected for the Hospital Readmissions Reduction Program for FY 2013 meet the stringent selection criteria as laid out in the statute and are conditions for which hospital interventions can lead to reduced readmissions. Specific interventions evaluated under the QIO 9th Statement of Work for reducing readmissions are listed at: https://www. cfmc.org/caretransitions/files/toolkit/ intervention/QIO%20Developed% 20Tools/Interventions_by_Driver_ 031011.pdf. We believe these three applicable conditions are most appropriate for the Hospital Readmissions Reduction Program. Comment: One commenter stated that using only three applicable conditions in the FY 2013 Hospital Readmissions Reduction Program will create opportunities for gaming. Response: We believe that the commenter was suggesting that hospitals might change coding practices to avoid identifying patients with AMI, HF, or PN. We plan to monitor trends in admissions and readmissions to ensure there no systematic shift in patients’ primary discharge diagnoses codes occurs as a result of implementation of the Hospital Readmissions Reduction Program. After consideration of the public comments we received, we are finalizing the proposed applicable 52 Dean NC, Bateman KA, Donnelly SM, et al. 2006. Improved clinical outcomes with utilization of a community-acquired pneumonia guideline. Chest 130(3):794–799. 53 Gleason PP, Meehan TP, Fine JM, et al. 1999. Associations between initial antimicrobial therapy and medical outcomes for hospitalized elderly patients with pneumonia. Arch Intern Med 159(21):2562–2572. 54 Benbassat J, Taragin M. 2000. Hospital readmissions as a measure of quality of health care: advantages and limitations. Arch Intern Med 160(8):1074–1081. 55 Benbassat J, Taragin M. 2000. Hospital readmissions as a measure of quality of health care: advantages and limitations. Arch Intern Med 160(8):1074–1081. 56 Jonas M, Grossman E, Boyko V, et al. 1999. Relation of early and one-year outcome after acute myocardial infarction to systemic arterial blood pressure on admission. Am J Cardiol 84:162–165. E:\FR\FM\18AUR2.SGM 18AUR2 51666 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 conditions of AMI, HF, and PN for use in the Hospital Readmissions Reduction Program for FY 2013. b. Definition of ‘‘Readmission’’ Section 1886(q)(5)(E) of the Act defines ‘‘readmission’’ as, ‘‘in the case of an individual who is discharged from an applicable hospital, the admission of the individual to the same or another applicable hospital within a time period specified by the Secretary from the date of such discharge.’’ The definition further states that ‘‘[i]nsofar as the discharge relates to an applicable condition for which there is an endorsed measure * * * such time period (such as 30 days) shall be consistent with the time period specified for such measure.’’ The three NQF-endorsed readmission measures define a readmission as occurring when a patient is discharged from the applicable hospital to a nonacute setting (for example, home health, skilled nursing, rehabilitation or home) and then is admitted to the same or another acute care hospital within a specified time period from the time of discharge from the index hospitalization (https://www.qualitynet.org/dcs/Content Server?c=Page&pagename= QnetPublic%2FPage%2FQnetTier4 &cid=1219069855841. The time period specified for these measures is 30 days. Because the measures as endorsed by NQF are calculated based on readmissions occurring within 30 days, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25931 through 25932), we proposed 30 days as the time period specified from the date of discharge for the purpose of defining readmission for the Hospital Readmissions Reduction Program. The 30-day time period also meets the requirement set forth in section 1886(q)(5)(E) of the Act that the time period specified by the Secretary for defining a readmission be consistent with the time period specified for the endorsed measures. We invited public comment on our proposal to adopt, without revision, a proposed definition of readmission with a time period of 30 days from the date of discharge from the index hospitalization as set forth in the existing NQF-endorsed measures. Comment: One commenter asked how multiple readmissions will be calculated. Response: The readmissions measures are designed to measure whether a patient experienced at least one readmission within 30 days of an initial (or ‘‘index’’) discharge as a single binary (yes/no) event, rather than counting the number of readmissions experienced within 30 days of discharge as a VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 separate readmissions. For any given patient, only the first readmission they have will be counted for the Hospital Readmissions Reduction Program. In addition, only one readmission during the 30 days following the discharge from the initial hospitalization will count as a readmission for purposes of calculating the ratios set forth in section 1886(q) of the Act. For any given patient, none of the subsequent readmissions they experience within 30 days after discharge would be counted as a new ‘‘index’’ admission (that is, an admission evaluated in the measure for a subsequent readmission). Any eligible admission after the 30-day time period will be considered a new index admission. Comment: One commenter recommended defining ‘‘readmission’’ to mean ‘‘readmission to the same hospital’’ because hospitals cannot control the admitting practices of other institutions. Response: Section 1886(q)(5)(E) of the Act, as added by the Affordable Care Act, defines ‘‘readmission’’ as ‘‘in the case of an individual who is discharged from an applicable hospital, the admission of the individual to the same or another applicable hospital.’’ We do not believe that the commenter’s suggestion to limit the definition of readmission to only those readmissions to the same hospital is consistent with the statutory definition of ‘‘readmission.’’ The statutory definition, which is consistent with the definition of ‘‘readmission’’ in the NQF-endorsed measures, captures the more than 20 percent of readmissions that occur at a hospital that is different from the hospital where the initial admission took place. We believe this is the appropriate approach. Although hospitals may not have influence over the admitting practices of outside institutions, we believe that hospitals can communicate effectively with postacute care providers and take other measures that can better prepare a patient for discharge to reduce the risk of readmission. After consideration of the public comments we received, we are finalizing our proposal to adopt the definition of readmission as occurring when a patient is discharged from the applicable hospital and then is admitted to the same or another acute care hospital within a specified time period from the time of discharge from the index hospitalization. PO 00000 Frm 00192 Fmt 4701 Sfmt 4700 c. Readmission Measures and Related Methodology (1) Readmission Measures for Applicable Conditions As explained above, section 1886(q)(5)(A)(ii) of the Act requires that each ‘‘applicable condition’’ selected by the Secretary has ‘‘measures of readmissions’’ that ‘‘have been endorsed by the entity with a contract under section 1890(a) [of the Act]’’ and that ‘‘such endorsed measures have exclusions for readmissions that are unrelated to the prior discharge.’’ In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25932), we proposed to adopt three NQF-endorsed, hospital riskstandardized readmission measures for AMI, HF, and PN which are currently included in the Hospital IQR Program. These existing measures are: • Acute Myocardial Infarction [AMI] 30-day Risk Standardized Readmission Measure (NQF #0505); • Heart Failure [HF] 30-day Risk Standardized Readmission Measure (NQF #0330); and • Pneumonia [PN] 30-day Risk Standardized Readmission Measure (NQF #0506). CMS adopted these measures for the Hospital IQR Program in the FY 2009 IPPS/LTCH PPS final rule for the FY 2010 payment determination (73 FR 48606) and the CY 2009 OPPS/ASC final rule with comment period (73 FR 68781). The NQF (the entity with a contract under section 1890(a) of the Act) has endorsed each of these ‘‘measures of readmissions’’ and, as explained in more detail below, those NQF-endorsed measures ‘‘have exclusions for readmissions that are unrelated to the prior discharge.’’ Therefore, we believe these measures meet the statutory requirements for selection for the Hospital Readmissions Reduction Program, and we proposed them, without modification, as measures for the program. Comment: Many commenters suggested changes to specific aspects of the three NQF-endorsed 30-day readmission measures for AMI, HF, and PN (for example, exclusions for unrelated readmissions and riskadjustment of the readmission measures). These comments are summarized and included in the sections of this document that discuss those specific aspects of the measures. Response: For the FY 2013 Hospital Readmission Reduction Program, the statute requires us to adopt NQFendorsed measures for the 3 conditions selected. We have proposed to use the three measures as currently NQF endorsed. As we discuss below in the E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 section regarding NQF endorsement of the measures, we believe that altering specific aspects of the measures that are part of the NQF endorsed methodology (such as exclusions and risk adjustment) would be inconsistent with the statutory requirement to use NQF-endorsed readmission measures. Comment: One commenter supported CMS’ proposal to adopt, without alteration, the three NQF-endorsed 30day readmission measures for AMI, HF, and PN. Response: We appreciate the commenter’s support of the readmission measures. After consideration of the public comments we received, we are finalizing three readmission reduction measures for the FY 2013 Hospital Readmissions Reduction Program: AMI 30-day risk standardized readmission measure, HF 30-day risk standardized readmission measure, and PN 30-day risk standardized readmission measure. (2) NQF Endorsement of Measures of Readmissions We note that these measures and their underlying methodologies were NQFendorsed. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25932), we proposed to adopt, for purposes of the Hospital Readmissions Reduction Program, the measures and related methodologies as they are currently endorsed by NQF. This includes the currently endorsed 30-day time window, risk-adjustment methodology, and exclusions for certain readmissions that comprise the measures. We stated our belief that our proposal to adopt, without modification, these measures of readmission is consistent with the statutory language, which requires the measures of readmissions to be ‘‘endorsed by the entity with a contract under section 1890(a) [of the Act].’’ If we were to modify the endorsed measures, we are concerned that they would no longer be considered ‘‘endorsed.’’ If the NQF were to later endorse a revised measure for one of these conditions, we would then propose through notice and comment rulemaking that the revised measure be used prospectively for purposes of the Hospital Readmissions Reduction Program. We welcomed public comment on our proposal to use, for each of the proposed applicable conditions, existing measures as endorsed by the NQF. We did not receive any public comments specifically on the NQFendorsement of the three proposed readmission measures. Therefore, we are finalizing the three NQF-endorsed Hospital Readmissions Reduction VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Program measures as proposed for the FY 2013 Hospital Readmissions Reduction Program. (3) Endorsed Measures With Exclusions for Unrelated Readmissions Section 1886(q)(5)(A)(i)(ii)(II) of the Act requires that each of the readmission measures also have ‘‘exclusions for readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital).’’ The three NQF-endorsed readmission measures that we proposed in the FY 2012 IPPS/ LTCH PPS proposed rule for inclusion in the Hospital Readmissions Reduction Program have exclusions that meet this statutory requirement. Under each measure, certain unrelated readmissions are not taken into account when determining the number of readmissions under the measures. The AMI 30-day risk standardized readmission measure, as endorsed by the NQF and as proposed in the FY 2012 IPPS/LTCH PPS proposed rule, has exclusions for certain unrelated readmissions. Because admissions for Percutaneous Transluminal Coronary Angioplasty (PTCA) or Coronary Artery Bypass Graft (CABG) may be staged or are typically scheduled readmissions for patients initially admitted for AMI, the AMI 30-day risk standardized readmission measure does not count as readmissions those admissions after discharge that include PTCA or CABG procedures, unless the principal discharge diagnosis for the readmission is one of the following diagnoses that are not consistent with a scheduled readmission: Heart failure, acute myocardial infarction, unstable angina, arrhythmia, and cardiac arrest (that is, readmissions with these diagnoses and a PTCA or CABG procedure are counted as readmissions). We adopted this approach when first developing this measure after consultation with clinical experts, including cardiologists, and review of relevant readmissions data. During the development of the readmission measures for both HF and PN, we similarly asked clinical experts to identify planned readmissions for these conditions, that is, those which would not count as a readmission, after an admission for HF or PN. Specifically, the clinical experts were asked whether there were common follow-up causes of readmissions for a scheduled procedure that represented a continuation of care after either a HF or PN admission, respectively. No such related, planned procedures were identified as occurring commonly after the index admissions for HF or PN at the time of the development of the Hospital IQR PO 00000 Frm 00193 Fmt 4701 Sfmt 4700 51667 Program measures. Therefore, no similar exclusions exist for the HF and PN measures of readmissions as they are currently endorsed. The three NQF-endorsed riskstandardized readmission measures that we proposed in the FY 2012 IPPS/LTCH PPS proposed rule exclude transfers to other acute care facilities from each of the readmission measures. The NQFendorsed proposed measures consider these multiple contiguous hospitalizations to be a single acute episode of care. The measures attribute the readmission for transferred patients to the hospital that ultimately discharges the patient to a non-acute care setting (for example, to home or a skilled nursing facility). Thus, in the case of a patient who is transferred between two or more hospitals, if the patient is readmitted in the 30 days following the final hospitalization, the measures attribute such a readmission to the hospital that discharged the patient to a non-acute care setting. We believe that the exclusion of transfers to other applicable hospitals under the measures is sufficient to meet the requirement set forth in section 1886(q)(5)(A)(ii)(II) of the Act that certain ‘‘unrelated’’ readmissions be excluded from the measures selected for use in the program. Comment: Many commenters stated that the current set of existing exclusions for unrelated readmissions did not meet Congress’ intent, which they believed requires additional exclusions for certain readmissions. These commenters noted that although the AMI measure contains exclusion for certain planned procedures, neither the heart failure nor the pneumonia measures contain such exclusions. Response: We thank the commenters for sharing their views on exclusions for the proposed readmission measures. Section 1886(q)(5)(A) of the Act requires us to select as the initial readmission measures those that are endorsed by the entity with a contract under section 1890(a) (currently the NQF), and that have exclusions for readmissions that are unrelated to the prior discharges (such as a planned readmission or transfer to another applicable hospital). The statute does not state that the measures must account for all possible unrelated readmissions. Moreover, adding exclusions would be inconsistent with the statute, which requires us to adopt the measures as endorsed by the NQF, and the endorsements currently include specific exclusions for unrelated readmissions, which include transfers. We recognize that there could conceivably be additional readmissions E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51668 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations that could properly be excluded from the readmission measures, and we intend to further explore if there are any such readmissions. If we determine that changes should be made to the measures used for the Hospital Readmissions Reduction Program in FY 2013, we will bring them to NQF for review for continued endorsement for the measures and would subsequently propose the revised measure for use in the Hospital Readmissions Reduction Program in future rulemaking. Comment: Several commenters urged CMS to ‘‘* * * conduct a study to thoroughly determine the common reasons for planned readmissions, as well as determine a subset of readmissions that are unrelated to a patient’s initial admission. * * *’’ These commenters also recommended three possible interim steps: (1) Not counting readmissions for certain patients (cancer, trauma, burns, endstage renal disease, psychiatric disorders, substance abuse, and rehabilitation); (2) allowing a coding modifier on hospital claims to identify planned readmissions; or (3) using existing classification schemes such as MS–DRGs or AHRQ’s classification system (https://www.hcup-us.ahrq.gov/ toolssoftware/ccs/ccs.jsp), the clinical classification software, which ‘‘groups diagnoses and procedure codes into clinically meaningful groups’’ to identify related readmissions (and to exclude readmissions that are not identified as related). Response: We appreciate the commenters’ suggestions. As part of our ongoing implementation of the Hospital Readmissions Reduction Program, we intend to further explore whether there are other readmissions that could be excluded from the readmission measures finalized in this rule, and we expect that we will solicit public input on this issue in future rulemaking. However, again we note that because the FY 2013 measures must be NQFendorsed, any changes to the measures used for the program in FY 2013 would have to be brought to NQF for review for continued endorsement before we could, in future rulemaking, propose the measures for use in the Hospital Readmissions Reduction Program. Comment: Some commenters expressed concern that inappropriate transfers from acute care hospitals to a different acute care hospital might occur. Several of these commenters requested that CMS monitor transfers to ensure that potentially high-risk patients are not unnecessarily transferred in an attempt to artificially reduce hospital readmission rates. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Response: We note that the NQFendorsed readmission measures as finalized in this rule are designed to count all readmissions unless they meet the planned procedure definition for AMI or involve a transfer to another acute care hospital. This approach is consistent with section 1886(q)(5)(ii)(II) of the Act which requires that ‘‘endorsed measures have exclusions for readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital).’’ With regard to the commenters’ concerns about hospitals transferring patients to another acute care institution to avoid being accountable for readmissions, we will consider future monitoring of transfer rates to assess if there are any unexpected changes in transfer patterns in response to the Hospital Readmissions Reduction Program. Comment: Two commenters expressed concern regarding the appropriateness of the exclusion criteria for unrelated readmissions for use in measures when applied to hospitals that treat specialized patient populations, such as LTCHs and IPPS-exempt cancer hospitals. One commenter emphasized the importance to rural hospitals of not counting unrelated or planned readmissions. Another commenter suggested that CMS not count readmissions related to random events such as falls or readmissions that occur during natural disasters or states of emergency. One commenter suggested a method of reporting ‘‘nonreportable’’ admissions via the claims payment system. One commenter believed that the upcoming implementation of ICD– 10 would enhance CMS’ ability to identify and remove readmissions related to random events. Response: We thank the commenters for their input on exclusion criteria, and we will consider these suggestions as we continue to implement the Hospital Readmissions Reduction Program. The proposed NQF-endorsed readmission measures were designed as ‘‘all-cause’’ readmission measures (that is, they count readmission regardless of the reason for readmission) because, from a patient perspective, readmission from any cause is an adverse event. Similarly, as we discussed above, many cases of seemingly unrelated diagnoses may, in fact, correspond to the original hospitalization, and differentiation is not always possible solely on the basis of the admitting diagnosis for the readmission. For instance, a patient with heart failure who develops a hospital-acquired infection may ultimately be readmitted with sepsis. In PO 00000 Frm 00194 Fmt 4701 Sfmt 4700 this context, we believe that the NQFendorsed readmission measure for heart failure appropriately considers the readmission to be related to the care the patient received for heart failure during the first hospitalization. In our view, readmissions that are truly unrelated to the hospitalization should not affect some hospitals more than others, because these readmissions should have the same probability of occurring for similarly situated patients, regardless of where the patient was initially hospitalized. We also note that planned readmissions are easier to identify, especially those that are elective and scheduled in advance either as follow-on care for a procedure following a hospitalization or that have been scheduled by outpatient providers, and are not indicative of care quality. Comment: One commenter stated there is another readmission measure available that has excludes greater numbers of unrelated readmissions and is in use in a State. Response: The readmissions measure referred to by the commenter is 3M’s Potentially Preventable Readmission measure and is in use in the State of Florida. This measure was reviewed by NQF in 2009 and was not endorsed (NQF # HOE–007–08). It is our understanding that the NQF’s Steering Committee’s decision not to endorse the measure reflected the Committee’s concern about the measure’s approach to identifying preventable readmissions. The measure developer specified over 98,000 admission–readmission diagnoses pairs (for example, a heart failure admission followed by readmission for a fall) as either clinically related and therefore preventable or not related and therefore not preventable. The NQF Steering Committee did not think these judgments were reliable, and it rejected the measure in part on this basis. We agree with the Steering Committee that this measure did not accurately specify what is related or unrelated simply by looking at the diagnoses for the admission and the readmission. After consideration of the public comments we received, we are finalizing the NQF-endorsed measures with exclusions for unrelated conditions, as proposed. (4) Methodology of Readmission Measures In the following section, we describe the major components of the measure methodology of the three NQF-endorsed risk-standardized readmission measures for AMI, HF and PN that we proposed for the implementation of the Hospital Readmissions Reduction Program. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 Additional details about each of these measures may be found online at https:// www.QualityNet.org>HospitalInpatient>Readmission Measures>methodologies. This Web page is located at https://www.quality net.org/dcs/ContentServer?c=Page& pagename=QnetPublic%2FPage%2 FQnetTier4&cid=1219069855841. Briefly, as is described in more detail in the sections below, the measures are risk-standardized rates of readmission. For each hospital, qualifying index hospitalizations are identified based on the principal discharge diagnosis of the patient and the inclusion/exclusion criteria (section IV.C.3.c.(4)(A) of this preamble on index hospitalizations). Each hospitalization is evaluated for whether the patient had a readmission to an acute care setting in the 30-days following discharge (section IV.C.3.c.(4)(B) of this preamble on readmission). Patient-risk factors, including age, and chronic medical conditions are also identified from inpatient and outpatient claims for the 12-months prior to the hospitalization for risk-adjustment (section IV.C.3.c.(4)(D) of this preamble on riskadjustment). The readmissions, sample size for each hospital, and patient riskfactors are then used to calculate a riskstandardized readmission ratio for each hospital. For the purposes of publiclyreporting the measures, this riskstandardized readmission ratio is then multiplied by the national crude rate of readmission for the given condition to produce a risk-standardized readmission rate (RSRR) (section IV.C.3.c.(5)(B) of this preamble). (A) Index Hospitalization An index hospitalization for each of the readmission measures is the hospitalization from which we evaluate the 30 days after discharge for possible readmissions. The measures, as endorsed by the NQF, evaluate eligible hospitalizations and readmissions of Medicare patients discharged from an applicable hospital (as defined by section 1886(q)(5)(C) of the Act) having a principal discharge diagnosis for the measured condition in an applicable period. The NQF-endorsed measures, as specified, exclude patients under 65 year of age. The discharge diagnoses for each applicable condition are based on a list of specific ICD–9–CM codes for that condition. These codes are listed in the 2010 Measures Maintenance Technical Report: Acute Myocardial Infarction, Heart Failure, and Pneumonia 30-Day Risk-Standardized Readmission Measures. They also are posted on the QualityNet Web site: https://www. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 QualityNet.org>HospitalInpatient>Readmission Measures>methodologies. See https:// www.qualitynet.org/dcs/Content Server?c=Page&pagename=Qnet Public%2FPage%2FQnetTier4&cid= 1219069855841. The current NQF-endorsed CMS 30day risk standardized readmission measures exclude the following admissions from the group of index hospitalizations: • Hospitalizations for patients with an in-hospital death (because they are not eligible for readmission); • Hospitalizations for patients without at least 30 days post-discharge enrollment in Medicare FFS (because the 30-day readmission outcome cannot be assessed in this group); • Hospitalizations for patients discharged against medical advice (because providers did not have the opportunity to deliver full care and prepare the patient for discharge). • Hospitalizations for patients under the age of 65. Comment: One commenter noted that admissions related to disaster preparedness or recovery should be excluded from the measures. One commenter noted that the nature of traumatic injuries is such that certain medical conditions are not always readily apparent upon admission and lead to the need for readmission. Response: We appreciate the commenter’s recommendation, and we intend to consider whether to it would be appropriate to allow waivers for extraordinary regional or local circumstances, such as natural disasters that are not in the control of the hospital. Any such process would be proposed in a future rulemaking. (B) Readmission As explained above, the initial hospitalization assessed for a readmission is called the index hospitalization. The proposed measures, as endorsed by the NQF, define readmission as a second admission to another acute care hospital within 30 days of the index hospitalization. Under the proposed measures, as endorsed by the NQF, a patient who is readmitted twice within 30 days simply is counted as having been readmitted; this patient’s readmissions are not counted differently than a patient with a single readmission within 30 days of discharge. With the exception of the exclusions discussed previously (transfers and planned readmissions, as discussed in the Exclusions for Unrelated Readmissions section above), the proposed measures, as currently endorsed by the NQF, include PO 00000 Frm 00195 Fmt 4701 Sfmt 4700 51669 readmissions for all causes, without regard to the principal diagnosis of the readmission. There are several reasons for this approach. First, from the patient’s perspective, readmission from any cause is an adverse event. Second, although we would expect few hospitals to use gaming strategies, we strive to make sure that measures do not create incentives for hospitals to do so. Limiting the readmissions to particular diagnoses creates an opportunity for hospitals to potentially avoid having readmissions counted by changing coding practices. Further, doing so could create a perverse incentive whereby hospitals begin to avoid patients with conditions that are part of the readmissions measures. Third, as discussed above, there are not currently any clinically and technically sound and accepted strategies for accurately identifying readmission that are unrelated to hospital quality based on the documented cause of readmission. Finally, we believe it is important that hospitals strive to reduce readmissions from all causes, not just for patients with conditions that happen to be readmissions measures. While the measures do not presume that each readmission is preventable, interventions have generally shown reductions in all types of readmissions (including both related and unrelated readmissions). The NQF measures are intended to provide incentives for hospitals to reduce readmissions and not to achieve zero readmissions. (C) Time Window The three proposed measures, as endorsed by the NQF, count readmissions within a 30-day period from the date of the initial discharge from the index hospitalization. The timeframe of 30 days is a clinically meaningful period for hospitals, in collaboration with their medical communities, to reduce readmission risk. This time period for assessing readmission is an accepted standard in research and measurement. We believe that during this 30-day time period, hospital and community partners can take steps to reduce risk by ensuring patients are clinically ready to be discharged, improving communication across providers, reducing risks of infections, and educating patients on symptoms to monitor whom to contact with questions and where and when to seek follow-up care can influence readmission rates. Comment: One commenter suggested the proposed 30-day time period (time window) is too long and should be reduced to 15 days. Another commenter E:\FR\FM\18AUR2.SGM 18AUR2 51670 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations supported the 30-day time window, but indicated that they preferred 15 days. Response: The proposed timeframe of 30 days from the date of the initial discharge from the index hospitalization is the timeframe that has been NQFendorsed as part of the three readmission measures. The timeframe of 30 days is considered an acceptable standard in both the research and measurement communities as this time period is long enough to capture a substantial proportion of readmissions attributable to an index hospitalization, a greater proportion than captured in just 15 days, and yet it is short enough that outcomes can be attributed to and influenced by hospital care and the early transition to the outpatient setting. The use of the 30-day timeframe is also a clinically meaningful period for hospitals to collaborate with their communities in an effort to reduce readmissions. Multiple studies have shown that interventions by hospitals can make an impact on 30-day readmission rates.54 55 56 Finally, we again note that, as required under the Act, we proposed the measures as they were endorsed by the NQF. Since the NQF-endorsed measures use a 30-day time period, we are finalizing our proposal to count readmissions within a 30-day period from the date of the initial discharge from the index hospitalization. mstockstill on DSK4VPTVN1PROD with RULES2 (D) Risk Adjustment Section 1886(q)(4)(C)(i)(I) of the Act requires that the number of readmissions used in the Excess Readmission Ratio be risk adjusted. This language requires us, when comparing hospitals’ readmission rates, to account for differences in the severity of illnesses of the patients that hospitals treat. Risk adjustment essentially ‘‘levels the playing field’’ for comparing hospital performance by taking into account that some hospitals’ patients are sicker than others on admission and therefore have a higher risk of readmission. The methodology for calculating the RSRRs under the NQF-endorsed measures that we proposed adjusts for key factors that are clinically relevant and have strong relationships with the 54 Benbassat J, Taragin M. 2000. Hospital readmissions as a measure of quality of health care: advantages and limitations. Arch Intern Med 160(8):1074–1081. 55 Benbassat J, Taragin M. 2000. Hospital readmissions as a measure of quality of health care: advantages and limitations. Arch Intern Med 160(8):1074–1081. 56 Jonas M, Grossman E, Boyko V, et al. 1999. Relation of early and one-year outcome after acute myocardial infarction to systemic arterial blood pressure on admission. Am J Cardiol 84:162–165. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 outcome (for example, patient demographic factors, patient co-existing medical conditions, and indicators of patient frailty). Under the current NQFendorsed methodology, these covariates are obtained from Medicare claims extending 12 months prior to, and including, the index admission. This risk-adjustment approach adjusts for differences in the clinical status of the patient at the time of the index admission as well as for demographic variables. A complete list of the variables used for risk adjustment and the clinical and statistical process for selecting the variables for each NQF-endorsed measure, as proposed, is available in the publicly-available technical documentation of the existing measures for AMI, HF, and PN. The risk adjustment variables for each condition are presented in the 2010 Measures Maintenance Technical Report: Acute Myocardial Infarction, Heart Failure, and Pneumonia 30-Day RiskStandardized Readmissions Measures that are posted on https://www. QualityNet.org>HospitalInpatient>Readmission Measures>Resources. The variables used are Condition Categories that group ICD–9–CM codes into clinically coherent variables. The 2010 Condition Category-ICD–9–CM Crosswalk provides a map to the specific ICD–9–CM codes in each variable and is also posted on https://www.QualityNet.org>HospitalInpatient>Readmission Measures>Measure Calculation Methodology or readers may use the following Web site address: https:// www.qualitynet.org/dcs/Content Server?c=Page&pagename=QnetPublic %2FPage%2FQnetTier4& cid=1219069855841. Comment: Many commenters argued that CMS should risk-adjust for patient characteristics beyond the medical diagnosis, age and gender currently included in the NQF-endorsed risk adjustment methodology. Specifically, commenters believed that patient race, language, life circumstances, environmental factors, and socioeconomic status (SES) should be included in the risk-adjustment methodology, because these factors also have an impact on health outcomes. Commenters expressed concern that without adding these adjustment factors, the Hospital Readmissions Reduction Program may disproportionately affect hospitals serving a large number of minorities, and by penalizing these hospitals, the program could in turn disproportionately harm minority patients. Commenters stated that failure PO 00000 Frm 00196 Fmt 4701 Sfmt 4700 to account for these factors could result in ‘‘disparate-impact discrimination,’’ potentially violating Title VI of Civil Rights Act and 45 CFR 80.3. Response: We do not agree that the use of the current NQF-endorsed risk adjustment methodology in the Hospital Readmissions Reduction Program will harm minorities. The proposed readmission measures are riskstandardized readmission measures that adjust for case-mix differences based on the clinical status of the patient at the time of admission to the hospital. That is, they are risk-adjusted for certain key variables (for example, age, sex, comorbid diseases and indicators of patient frailty) that are clinically relevant and/or have been found to have strong relationships with the outcome. To the extent that race or SES results in certain patient groups having a greater disease burden, those factors are accounted for in the measure. A more complete description of the risk adjustment model and its development is available on the QualityNet Web site (https://www.qualitynet.org/dcs/Content Server?c=Page&pagename=Qnet Public%2FPage%2FQnetTier4& cid=1219069855841). However, these measures are not adjusted for other factors such as race, English language proficiency or SES. We believe such additional adjustments are not appropriate because the association between such patient factors and health outcomes can be due, in part, to differences in the quality of health care received by groups of patients with varying race/language/SES. Differences in the quality of health care received by certain racial and ethnic groups may be obscured if the measures risk-adjust for race and ethnicity. Additionally, riskadjusting for patient race, for instance, may suggest that hospitals with a high proportion of minority patients are held to different standards of quality than hospitals treating fewer minority patients. We appreciate the concerns of hospitals that care for disproportionately large numbers of disadvantaged populations. Our analysis indicates that better quality of care is achievable regardless of the demographics of the hospital’s patients. (See: Medicare Hospital Quality Chartbook 2010). Although we believe the current riskadjustment methodology properly accounts for different patient circumstances, we will monitor whether the Hospital Readmissions Reduction Program has a disparate impact on 57 https://www.cms.gov/HospitalQualityInits/ 20_OutcomeMeasures.asp#TopOfPage. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations hospitals that care for large numbers of disadvantaged patients. If such an impact is found, we will consider whether additional program modifications would be appropriate and consistent with the statutory requirements and intent of the program. For example, one option might be to refine the measures themselves to include factors such as SES in the risk adjustment. We also note that there are programs that provide technical and financial support that may assist hospitals in improving performance on the readmission measures included in the Hospital Readmissions Reduction Program such as the Community Based Care Transitions program authorized under section 3026 of the Affordable Care Act and the Partnership for Patients, a new public-private partnership that will help improve the quality, safety and affordability of health care. In addition, assistance in lowering readmission rates is available from the Quality Improvement Organizations. Comment: Several commenters suggested that trauma hospitals and safety-net hospitals are at increased risk of being subject to a payment adjustment under the Hospital Readmissions Reduction Program because of insufficient risk-adjustment for ‘‘case-mix’’ or the fact that their patients are sicker, lack access to appropriate post-discharge care, may suffer numerous chronic conditions, and may have substance abuse or behavioral problems. Another commenter expressed concern that coding does not capture patients in palliative care or those readmitted from hospice, but acknowledged that CMS risk adjustment methodology is the state of the art at present. Response: We thank the commenters for their input. As noted above, our analyses suggest that trauma and safety net hospitals caring for high proportions of at-risk patients can, and frequently do, perform as well on the readmission measures as those hospitals with fewer at-risk patients (see: Medicare Hospital Quality Chartbook 2010, pp 14–19). We do not exclude hospice patients or those who have elected palliative care from the readmission measures because we do not believe that it is appropriate to differentiate, as to the appropriateness of care provided, between patients who have elected hospice or palliative care and those who have not. After consideration of the public comments we received, we are finalizing the risk-adjustment methodology as proposed and endorsed by the NQF. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 (E) Applicable Period Section 1886 (q)(5)(D) of the Act authorizes the Secretary to specify the ‘‘applicable period’’ with respect to a fiscal year. Currently, for Hospital IQR Program public reporting purposes, we use 3 years of data (three 12-month increments) to calculate the three proposed readmission measures. This provides substantially more data than a 1- or 2-year timeframe and increases the precision of the measure in distinguishing performance among hospitals. Additionally, it is advantageous to have three years worth of data for purposes of displaying the three proposed readmission measures on Hospital Compare where we categorize hospital performance into one of three discrete categories: ‘‘Better than the US national rate,’’ ‘‘No different than the US national rate,’’ and ‘‘Worse than the US national rate.’’ For the FY 2013 Hospital Readmissions Reduction Program, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25934), we proposed to use 3 years of data for discharges from July 1, 2008 through June 30, 2011 as the applicable period upon which to calculate Excess Readmission Ratios for each of the three proposed measures. Based on our experience with the Hospital IQR Program, we believe that this timeframe increases the precision of the measures in distinguishing performance among hospitals. However, for purposes of the Hospital Readmissions Reduction Program, we will not be categorizing hospital performance in three categories; rather, we will be using the measures to calculate Excess Readmission Ratios for the three conditions. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25934), we proposed to use a 3-year data period spanning July 1, 2008 through June 30, 2011, as the applicable period for determining the FY 2013 Hospital Readmissions Reduction Program payment adjustment. We indicated that we are currently conducting analyses to determine an appropriate data period (for example, 1 year, 2 years, 3 years) that will yield reliable Excess Readmission Ratios for the three proposed measures, and that we intend to consider both the positive and negative consequences of using longer or shorter data periods for this program. We also indicated that should our analysis or public comment indicate that a shorter data period yields Excess Readmission Ratios with acceptable reliability, we may consider finalizing a shorter time period. We invited public comment and suggestions on the topic of an PO 00000 Frm 00197 Fmt 4701 Sfmt 4700 51671 appropriate length for the applicable period to consider for the three proposed readmission measures for FY 2013. Comment: Many commenters recommended that CMS shorten the proposed applicable period of 3 years so that only more recent data would be used for the Hospital Readmissions Reduction Program. Some commenters urged CMS to shorten the timeframe because the commenters believed it was unfair to assess hospital performance on data that occurred during 2008, which is ‘‘long before [the Hospital Readmissions Reduction Program provision] was passed * * *’’ Response: We thank the commenters’ for their views regarding the data used for the measures. We proposed 3 years as the applicable period because we believe that this time period would ensure the proposed measures covers a sufficient number of applicable patients for hospital performance to be fairly portrayed. For example, from 2006 through 2008, only 2,500 of the 4,500 qualifying hospitals for the Hospital Readmissions Reduction Program reported at least 25 discharges for AMI during that time period. As stated above, we indicated that we are currently conducting analyses to determine if a different data period (for example, 1 or 2 years) might also yield reliable Excess Readmission Ratios for the three proposed measures. We intend to consider both the positive and negative consequences of using longer or shorter data periods for this program. If our analysis or public comments indicate that a shorter data period yields Excess Readmission Ratios with acceptable reliability, we may consider finalizing a shorter time period. Because we did not receive any public comments demonstrating that a shorter period would yield reliable and meaningful results upon which differences in hospital performance could be appropriately distinguished, and because our own analysis indicated that 3 years continues to be an appropriate period, we are finalizing 3 years as the applicable period for the FY 2013 Hospital Readmissions Reduction Program. (F) Data Sources As discussed above, the adjustment under section 1886(q) of the Act is made to the ‘‘base operating DRG payment amount,’’ and components of the ratio used to determine a hospital’s adjustment factor also use that payment amount. Payments under section 1886 of the Act, including the ‘‘base operating DRG payment amount,’’ are made for services furnished to Medicare’s fee-for- E:\FR\FM\18AUR2.SGM 18AUR2 51672 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 service population under part A. Therefore, for purposes of implementing the Hospital Readmissions Reduction Program under section 1886(q) of the Act, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25934), we proposed to use Medicare claims data for the Medicare FFS population over the age of 65 only. This is the same universe of claims used for calculating the NQF-endorsed measures for the purposes of the Hospital IQR Program. The administrative data sources for the risk adjustment analyses are Medicare administrative claims datasets that contain FFS inpatient and outpatient (Medicare Parts A and B) claims information in the prior 12 months and subsequent one month for patients admitted in each of these years. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25934), we proposed to use claims from the index hospitalization included the measure and from the prior 12 months from all of these data sources to gather risk factors. If the patient does not have any claims in the 12 months prior to the index hospitalization admission, only comorbidities from the included admission are used. We welcomed public comment on this proposal. We did not receive any public comments on this proposal. Therefore, we are finalizing the data sources used for the Hospital Readmissions Reduction Program as proposed in the FY 2012 IPPS/LTCH PPS proposed rule. (G) Minimum Number of Discharges for Applicable Conditions Section 1886(q)(4)(C)(II)(ii) of the Act authorizes the Secretary to exclude readmissions for an applicable condition for which there are ‘‘fewer than a minimum number (as determined by the Secretary).’’ Currently, for public reporting purposes under the Hospital IQR Program, only hospitals with at least 25 discharges for each of the three proposed applicable conditions are included in the display of the three proposed readmission measures on Hospital Compare. We chose this number of discharges for the Hospital IQR Program based on our findings that using fewer cases did not provide sufficiently reliable information on hospital performance. In general, the larger the number of cases, the more reliable the information. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25935), we indicated that we are currently conducting additional analyses to further evaluate the appropriate minimum number of discharges needed to yield reliable Excess Readmission Ratios for the three VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 proposed measures. However, based on our experience with the Hospital IQR Program, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25934 through 25935), we proposed to use the current threshold of 25 discharges for each of the three measures for the Hospital Readmissions Reduction Program. However, we indicated that should our analysis or public comment indicate that a different minimum number of discharges would be more appropriate for this program, we would consider finalizing a different number. We invited public comment and suggestions on the topic of appropriate minimum number of discharges to consider for the three proposed readmission measures. Comment: Several commenters supported the proposed minimum number of 25 discharges. Other commenters stated that 25 discharges is too small a number to reliably profile hospitals. Response: We appreciate hearing from commenters regarding the proposed minimum number of discharges. We continue to believe that 25 discharges is the appropriate cut-off. As noted in the proposed rule, we have been using 25 cases as the minimum sample size for publicly reporting hospital quality measures on Hospital Compare Web site for the Hospital IQR Program. Hospitals are familiar with this threshold. We also proposed to use this threshold of 25 discharges for each of the three measures to calculate the Excess Readmission Ratios because we believe this number helps maximize hospital participation and at the same time ensures that we achieve reasonable reliability for profiling hospital performance. After consideration of the public comments we received, we are finalizing our proposal to use 25 discharges as the minimum number of discharges for applicable conditions for the FY 2013 Hospital Readmissions Reduction Program. We note that analyses to determine appropriate sample size to yield reliable Excess Readmission Ratios for the three readmission measures are ongoing. If the results of our analyses suggest that a different minimum number of discharges would be more appropriate, we will propose to revise the minimum number accordingly through future rulemaking. (H) Reporting Hospital-Specific Readmission Rates Section 1886(q)(6)(A) of the Act requires the Secretary to ‘‘make information available to the public regarding readmission rates of each PO 00000 Frm 00198 Fmt 4701 Sfmt 4700 subsection (d) hospital under the [readmissions reduction] program.’’ Section 1886(q)(6)(B) of the Act requires the Secretary to ‘‘ensure that a subsection (d) hospital has the opportunity to review and submit corrections for, the information to be made public with respect to the hospital * * * prior to such information being made public.’’ Section 1886(q)(6)(C) of the Act requires the Secretary to post the hospital-specific readmission information on the Hospital Compare Web site in an easily understandable format. We currently report information on the three readmission rates that we are finalizing in this rule on the Hospital Compare Web site for each subsection (d) hospital. We provide hospitals with an opportunity to preview their readmission rates for 30 days prior to posting on the Web site. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25935), we proposed to use a similar process and timeframe for the rates calculated for the Hospital Readmissions Reduction Program. Through this process, hospitals will be able to review the information and submit to CMS corrections in advance of the information to be made public. We will review all such correction submissions and determine the appropriateness of any revisions. We will inform the hospital requesting corrections of our findings, and we will make any appropriate revisions to the information to be made available to the public regarding the hospital’s readmission rates. We invited public comment on this proposal. Comment: Several commenters supported our proposal to use a preview period and public reporting process that is similar to that used in the Hospital IQR Program. Two commenters requested more information about how the information will be presented on the Hospital Compare Web site. One recommended that more specific data on actual readmission rates be portrayed. Response: We appreciate the commenters’ support for the proposed reporting procedure for hospital-specific readmission rates. This reporting procedure will be different from what is reported with the Hospital IQR Program. The Hospital IQR Program identifies hospitals on Hospital Compare as being better than, no different than, or worse than the national rate for readmission. However, the Hospital Readmissions Reduction Program will include hospital-specific readmission rates. Comment: One commenter requested clarification on ‘‘what grounds and with E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 what data’’ a hospital might appeal its calculated expected readmissions ratio. Response: As stated earlier, hospitals will be able to review the information and submit to CMS corrections related to their readmission rate in advance of the information to be made public. We will review all such correction submissions and determine the appropriateness of any revisions. The policies regarding what aspects of the readmission rates are subject to corrections, as well as specifics regarding the review and correction process will be proposed in future rulemaking. We will consider the commenter’s concern as we develop our proposal. After consideration of the public comments we received, we are finalizing the proposed reporting procedure for hospital-specific readmission rates for the FY 2013 Hospital Readmissions Reduction Program. (I) Readmission Rates for All Patients Section 1886(q)(8)(A) of the Act requires the Secretary to calculate readmission rates for all patients for a ‘‘specified hospital’’ for an applicable condition and ‘‘other conditions deemed appropriate by the Secretary for an applicable period.’’ Section 1886(q)(8)(D)(ii) of the Act defines ‘‘specified hospital’’ as: ‘‘a subsection (d) hospital; hospitals described in clauses (i) through (v) of subsection (d)(1)(B) (psychiatric hospitals, rehabilitation hospitals, children’s hospitals, LTCHs, and cancer hospitals); and, as determined feasible and appropriate by the Secretary, other hospitals not otherwise described. * * *’’ Such information is to be calculated in the same manner as used to calculate readmission rates for hospitals with respect to the postings on the CMS Hospital Compare Web site. Section 1886(q)(8)(C) of the Act requires specified hospitals, or a State or an appropriate entity on behalf of the hospitals, to submit to the Secretary, in a form, manner and time specified by the Secretary, data and information determined necessary to calculate the all patient readmission rates. Section 1886(q)(8)(D) of the Act defines ‘‘all patients’’ to mean patients who are treated on an inpatient basis and discharged from a specified hospital. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25935), we did not propose any specific policies to implement section 1886(q)(8) of the Act, but we invited public comment and suggestions for issues related to implementation of these provisions, such as the mechanisms to collect the all-patient VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 data, the collection of patient identifiers to track patient care history across multiple settings to conduct risk adjustment for outcome measures, what entities could submit all patient data on behalf of hospitals, and more generally, the requirement for all patient data submission. Comment: One commenter supported the calculation of all-patient readmission rates. Another commenter supported the decision to defer proposals for the collection of data necessary for readmission rates of all patients to allow CMS enough time to put the underlying infrastructure in place. One commenter suggested allowing hospitals to either submit data directly to CMS, or through a third party that is not another payer. Response: We appreciate the comments provided on this issue. As we stated in the proposed rule, we will take them into account in the calculation and reporting of readmission rates for all patients in future rulemaking. (5) Excess Readmission Ratio (A) Statutory Background Section 1886(q)(4)(C) of the Act requires the Secretary to develop a riskadjusted ‘‘Excess Readmission Ratio.’’ The Excess Readmission Ratio will be used in the calculation of ‘‘aggregate payments for excess readmissions’’ as required under section 1886(q)(4)(A)(iii) of the Act, which, in turn, is used to determine the adjustment factor under section 1886(q)(3) of the Act. Specifically, section 1886(q)(4)(C)(i) of the Act states that the term ‘‘ ‘excess readmission ratio’ means, with respect to an applicable condition for a hospital for an applicable period, the ratio * * * of * * * the risk adjusted readmissions based on actual readmissions * * * to * * * the risk adjusted expected readmissions. * * *’’ The Act also requires that the numerator and denominator of the ratio, that is, ‘‘risk adjusted readmissions based on actual readmissions’’ and the ‘‘risk adjusted expected readmissions,’’ be determined ‘‘consistent with a readmission measure methodology that has been endorsed under paragraph (5)(A)(ii)(I) [of the Act].’’ (B) Excess Readmission Ratio Methodology In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25935 through 25936), we proposed to use the riskstandardized ratio calculated for the NQF-endorsed measures for AMI, HF, and PN as the ‘‘Excess Readmission Ratio.’’ This risk-standardized ratio (Excess Readmission Ratio), as required PO 00000 Frm 00199 Fmt 4701 Sfmt 4700 51673 by the Act, is a ratio of ‘‘risk adjusted readmission based on actual’’ to ‘‘risk adjusted expected readmissions.’’ Moreover, use of this ratio meets the statutory requirement that the numerator and denominator of the ratio be determined in a manner that is ‘‘consistent with’’ an NQF-endorsed readmission measure methodology. The proposed ratio is a measure of relative performance. If a hospital performs better than an average hospital that admitted similar patients (that is, patients with the same risk factors for readmission such as age and comorbidities), the ratio will be less than one. If a hospital performs worse than average, the ratio will be greater than one. Hospitals with a ratio greater than one have excess readmissions relative to average quality hospitals with similar types of patients. As part of the Hospital IQR Program, the risk-standardized ratio is used to generate the measure results for these three measures that are reported on Hospital Compare Web site. The riskstandardized ratio is the unique result produced by the measures for each hospital for each condition to assess relative hospital performance. Hospitals may not be familiar with this ratio because the measure result reported on Hospital Compare for each hospital and each condition is this ratio multiplied by a constant (the national raw rate of readmission for the condition), and it is currently presented as the riskstandardized readmission rate (RSRR). Multiplying by a constant transforms the ratio into a rate (the riskstandardized readmission rate) that is better understood by the public. Thus Hospital Compare results for CMS readmission measures are computed as follows: [Hospital risk-standardized ratio] X [national raw readmission rate] (i) Numerator and Denominator of the Risk-Standardized Ratio (Excess Readmission Ratio) The NQF-endorsed measures, which we are finalizing in this rule for the Hospital Readmissions Reduction Program, calculate this riskstandardized ratio (Excess Readmission Ratio) using hierarchical logistic modeling, which is a widely accepted statistical method that evaluates relative hospital performance based on outcomes such as readmission. The method adjusts for variation across hospitals in how sick their patients are when admitted to the hospital (and therefore variation in hospitals’ patients’ readmission risk) as well as the variation in the number of patients that a hospital treats to reveal difference in E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 quality. The detailed methodology for these measures is publicly-available and the calculation ‘‘SAS packs’’ are made available upon request. This is the calculation software that permits the measures to be calculated. We describe the key details of the methodology here. In order to model the extent to which hospitals affect patients’ risk of readmission, this statistical model first analyzes data on all the patients discharged from all hospitals for a given condition that indicate for each patient what comorbidities were present when the patient was admitted and whether or not the patient was readmitted and calculates: • How much variation in hospital readmission rates overall is accounted for by variation across hospitals in patients’ individual risk factors (such as age and other medical conditions); a risk weight (beta-coefficient) is calculated for each patient risk factor at all hospitals. The specific approach and variables used in the risk adjustment are discussed below. • How much variation in readmission rates is accounted for by hospitals’ contribution to readmission risk, after adjusting for differences in readmission due to differences in patients’ risk factors. The model estimates the amount by which a specific hospital increases or decreases patients’ risk of readmission relative to an average hospital based on the hospitals actual readmission relative to hospitals with similar patients. The estimated amount each hospital contributes (or subtracts) from its patients readmission risk compared to hospitals with similar patients is called the ‘‘hospital-specific readmission VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 effect.’’ It is used only in the numerator to estimate the adjusted actual readmissions. The hospital-specific effect will be negative for a hospital above the national average (that is, with lower than average adjusted rates of readmissions), positive for a hospital below the national average (that is, with higher than average adjusted rates of readmissions), and close to zero for an average hospital. If there are no quality differences resulting in excess readmissions among hospitals (if all hospitals had the same readmission rates relative to hospitals with similar patients), the hospital-specific effects for all hospitals will be zero and the ratio for all hospitals will be one. Comment: One commenter expressed concern that multiplying the ratio by the national raw rate of readmissions could inflate the readmission rate for a given hospital. Response: As discussed above, the Excess Readmission Ratio is calculated using hierarchical logistic regression which produces an adjusted actual (or ‘‘predicted’’) number in the numerator and an ‘‘expected’’ number in the denominator. The expected calculation is similar to that for logistic regression— it is the sum of all patients’ expected probabilities of readmission given their risk factors and the risk of readmission at an average hospital. The excess readmissions ratio is multiplied by the national readmission rate for reporting of risk-standardized readmission rates to the public as a part of the Hospital IQR Program for ease of interpretation. This serves to standardize all hospitals rates to the national rate but should not be PO 00000 Frm 00200 Fmt 4701 Sfmt 4725 interpreted as the unadjusted rate for a given hospitals. Depending on the hospital’s performance it may be higher or lower than the hospital’s raw readmission rate. The Hospital Readmissions Reduction Program uses the Excess Readmission Ratio rather than the raw readmission rate. (ii) Numerator Calculation—Adjusted Actual Readmissions For each hospital, the numerator of the ratio used in the NQF-endorsed methodology (actual adjusted readmissions) is calculated by estimating the probability of readmission for each patient at that hospital and summing up over all the hospital’s patients to get the actual adjusted number of readmissions for that hospital. This estimated probability of readmission for each patient is calculated using: • The hospital-specific effect (probability of readmission relative to the probability of readmission at an average hospital); • The intercept term for the model (this is the average hospital-specific effect and is the same for all hospitals and for both numerator and denominator equations). The intercept term is the probability of readmission for each patient when the value of all the patient risk factors is zero; • The probability of readmission contributed by each of the patients’ risk factors (risk adjustment coefficients multiplied by the patient’s risk factors, X) Mathematically, the numerator equation can be expressed as: E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.016</GPH> 51674 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations hospital-specific effect discussed in the rule—is derived from the hospital’s actual readmission rate relative to hospitals with similar patients. Thus, the numerator is each hospital’s adjusted actual readmissions. This approach to calculating the numerator, although more complex than that used for logistic regression, is the method traditionally used in hierarchical regression modeling and is statistically more accurate given the type of data being used. Other methods may overestimate the differences between hospitals. Thus, the ratio compares the total adjusted actual readmissions at the hospital to the number that would be expected if the hospital’s patients were treated at an average hospital with similar patients. Hospitals with more adjusted actual readmissions than expected readmissions will have a riskstandardized ratio (Excess Readmission Ratio) greater than one. Because the ratio is risk-adjusted, a hospital may have high crude readmission rates (number of 30-day readmissions among patients with the applicable condition divided by number of admissions for patients with the applicable condition) yet have a riskstandardized ratio (Excess Readmission Ratio) less than one. For example, if a hospital with a higher than average raw readmission rate cares for very sick patients, the ratio may show that the adjusted actual number of readmissions (the numerator), which accounts for the case-mix, is actually lower than what would be expected for an average hospital caring for these patients (denominator) and therefore the Excess Readmission Ratio, as proposed, will be less than one, demonstrating that this hospital performs better than average, despite having a high crude readmission rate. Similarly, if a hospital has a seemingly low unadjusted readmission rate but cares for a very low risk population of patients, it may be found to have an adjusted actual number of readmissions that is higher than the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 (iii) Denominator Calculation— Expected Readmissions (at an Average Quality Hospital Treating the Same Patients) The denominator of the riskstandardized ratio (Excess Readmission PO 00000 Frm 00201 Fmt 4701 Sfmt 4700 Ratio) under this NQF-endorsed methodology sums the probability of readmission for each patient at an average hospital. This probability is calculated using: • The intercept term for the model (the same for all hospitals and for both numerator and denominator equations); and • The increase or decrease in the probability of readmission contributed by each of the patients’ risk factors (risk adjustment coefficients multiplied by the patient’s risk factors, X). This can be expressed mathematically as: expected number of readmissions, and therefore a ratio greater than one. In summary, in the FY 2012 IPPS/ LTCH PPS proposed rule, we proposed to use the risk-standardized readmission ratio of the NQF-endorsed readmission measures as the Excess Readmission Ratio. The ratio is a measure of relative performance. If a hospital performs better than an average hospital that admitted similar patients (that is, patients with the same risk factors for readmission such as age and comorbidities), the ratio will be less than 1.0. If a hospital performs worse than average, the ratio will be greater than 1.0. We welcomed public comment on our proposal to use this methodology for E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.017</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Comment: One commenter requested clarification on how the numerator calculation of probable readmissions is related to the adjusted actual readmission. The commenter suggested that CMS take actual readmissions (observed) divided by the expected readmission. Response: As explained in the FY 2012 IPPS/LTCH PPS proposed rule and this final rule, consistent with the requirements in section 1886(q)(4)(C)(i)(I) of the Act, the numerator is the adjusted actual number of readmissions, which is the sum of the probability of readmission for all patients admitted at the particular hospital given the patients’ risk factors and the hospitals estimated contribution to readmission risk. This estimated contribution to readmission risk—the 51675 mstockstill on DSK4VPTVN1PROD with RULES2 51676 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations calculating the ‘‘risk adjusted readmissions based on actual readmissions’’ as well as the ‘‘risk adjusted expected readmissions’’ used to determine the Excess Readmission Ratio, as set forth in section 1886(q)(5)(C) of the Act. Comment: Some commenters interpreted the Affordable Care Act as requiring CMS to calculate observed and expected rates and, therefore, these commenters suggested that CMS revise the measures to use the calculation of observed and expected rates. Some commenters compared the hierarchical modeling approach to the logistic regression model, which produces an expected rate for the denominator and uses the observed (raw count of readmission) for the numerator. One commenter requested CMS to provide reasons for not using a conventional observed over expected ratio in the methodology. Response: We appreciate the commenter’s thoughts on the Excess Readmission Ratio. Consistent with the statutory requirement that the Secretary must develop a risk-adjusted Excess Readmission Ratio that is the ratio of ‘‘the risk adjusted readmissions based on actual readmission, as determined consistent with a readmission measure methodology that has been endorsed under paragraph (5)(A)(ii)(I) * * * to the risk adjusted expected readmissions,’’ we proposed to calculate the Excess Readmission Ratio using hierarchical modeling (rather than logistic regression, which produces an observed over expected ratio). We believe that hierarchical modeling is a more appropriate statistical approach for hospital outcomes measures than the calculation of observed over expected ratio using the logistic regression model for various reasons. First, the hierarchical model meets the requirement under section 1886(q)(4)(C)(i)(I) of the Act for NQFendorsement and risk-adjustment. Second, we believe that hierarchical modeling is a more appropriate statistical approach given the structure of the data and the underlying assumption of such measures which is that hospital quality of care influences 30-day readmission rates. Patients are clustered within hospitals and, as such, have a shared exposure to the hospital’s quality processes. The advantage of using the hierarchical modeling is that it accounts for the clustering of patients within hospitals. Third, hierarchical models distinguish within-hospital variation and between-hospital variation in the estimation of the hospital’s contribution to the risk of mortality. The estimation of the hospital’s influence on VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 patient outcomes is more noticeable. Finally, within hierarchical models, we can account for both differences in case mix and sample size to more fairly profile hospital performance. If we did not use hierarchical modeling, we may overestimate variation and potentially mischaracterize hospitals’ performance with respect to readmissions. After consideration of the public comments we received, we are finalizing the proposed methodology for readmission measures, including the definitions of ‘‘index hospitalization,’’ ‘‘readmission,’’ ‘‘time window,’’ ‘‘risk adjustment methodology,’’ ‘‘applicable periods,’’ ‘‘data sources,’’ ‘‘minimum number of discharges for applicable conditions,’’ and ‘‘reporting hospitalspecific readmission rates,’’ as proposed, for use in the FY 2013 Hospital Readmissions Reduction Program. D. 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 payment adjustment for RRCs such that they are not subject to the 12-percent cap on DSH payments that is applicable to other rural hospitals. RRCs are also not subject to the proximity criteria when applying for geographic reclassification. In addition, they do not have to meet the requirement that a hospital’s average hourly wage must exceed, 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 PO 00000 Frm 00202 Fmt 4701 Sfmt 4700 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 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 2012 includes data from all urban hospitals nationwide, and the regional values for FY 2012 are the median CMI values of urban hospitals within each census region, excluding those hospitals with E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 discharges occurring during FY 2010 (October 1, 2009 through September 30, 2010), and include bills posted to CMS’ records through March 2011. For the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25938), 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, 2011, they must have a CMI value for FY 2010 that is at least— • 1.5292; 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 2012 IPPS/LTCH PPS proposed rule at 76 FR 25938.) The final CMI criteria for FY 2012 are based on the latest available data (FY 2010 bills received through March 2011). 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, 2011, they must have a CMI value for FY 2010 that is at least— • 1.5305; 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: mstockstill on DSK4VPTVN1PROD with RULES2 Region 1. New England (CT, ME, MA, NH, RI, VT) ........................... 2. Middle Atlantic (PA, NJ, NY) 3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) .. 4. East North Central (IL, IN, MI, OH, WI) ........................... 5. East South Central (AL, KY, MS, TN) ................................. 6. West North Central (IA, KS, MN, MO, NE, ND, SD) .......... 7. West South Central (AR, LA, OK, TX) ................................. 8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ................. 9. Pacific (AK, CA, HI, OR, WA) ....................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 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 2012 IPPS/LTCH PPS proposed rule (76 FR 25938 and 25939), we proposed to update the regional standards based on discharges for urban hospitals’ cost reporting periods that began during FY 2009 (that is, October 1, 2008 through September 30, 2009), which are the latest cost report data available at the time the proposed rule was developed. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25938 and 25939), 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, 2011, must have, as the number of discharges for its cost reporting period that began during FY 2009, 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 2012 IPPS/LTCH PPS proposed rule at 76 FR 25939).) Based on the latest discharge data available at this time, that is, for cost Case-mix index value reporting periods beginning on or after October 1, 2011, the final median numbers of discharges for urban 1.3237 1.3745 hospitals by census region are set forth in the following table. 1.4589 Region 1.4620 1.3996 1.4456 1.5689 1.6277 1.5169 Jkt 223001 1. New England (CT, ME, MA, NH, RI, VT) ......................... 2. Middle Atlantic (PA, NJ, NY) ...................................... 3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) 4. East North Central (IL, IN, MI, OH, WI) ......................... 5. East South Central (AL, KY, MS, TN) ........................ PO 00000 Frm 00203 Fmt 4701 Sfmt 4700 Region 6. West North Central (IA, KS, MN, MO, NE, ND, SD) ........ 7. West South Central (AR, LA, OK, TX) ........................ 8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ............... 9. Pacific (AK, CA, HI, OR, WA) ..................................... 51677 Number of discharges 8,116 6,426 9,608 8,900 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 under this final rule. We reiterate that, if an osteopathic hospital is to qualify for RRC status for cost reporting periods beginning on or after October 1, 2011, the hospital would be required to have at least 3,000 discharges for its cost reporting period that began during FY 2009. E. Payment Adjustment for Low-Volume Hospitals (§ 412.101) 1. Background 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. The additional payment adjustment to a low-volume hospital provided for under section 1886(d)(12) of the Act is ‘‘in addition to any payment calculated under this section.’’ Therefore, the additional payment adjustment is based on the per discharge amount paid to the qualifying hospital under section 1886 of the Act. In other words, the low-volume add-on payment amount is based on all other per discharge payments made under section 1886 of the Act, including capital, DSH, IME, and outliers. For SCHs and MDHs, the low-volume addon payment amount is based on either the Federal rate or the hospital-specific rate, whichever results in a greater operating IPPS payment. Sections 3125 and 10314 of the Affordable Care Act amended the definition of a low-volume hospital under section 1886(d)(12)(C) of Number of the Act. Sections 3125 and 10314 of the discharges Affordable Care Act also revised the methodology for calculating the 8,141 payment adjustment for low-volume hospitals. 11,919 Prior to the amendments made by the Affordable Care Act, section 11,422 1886(d)(12)(C)(i) of the Act defined a 8,981 low-volume hospital as ‘‘a subsection (d) hospital (as defined in paragraph 7,528 (1)(B)) that the Secretary determines is E:\FR\FM\18AUR2.SGM 18AUR2 51678 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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 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 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 low-volume hospital payment adjustment and qualifying criteria, as implemented in FY 2005, will resume. Specifically, as discussed above, the provisions of the Affordable Care Act revised the definition of a lowvolume hospital and also revised the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 methodology for calculating the payment adjustment for low-volume hospitals for FYs 2011 and 2012. 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.’’ Section 3125(3)(A) of the Affordable Care Act revised the distance requirement of ‘‘25 road miles’’ to ‘‘15 road miles’’ for FYs 2011 and 2012 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. The mileage requirement will revert back to ‘‘more than 25 road miles’’ for fiscal years after FY 2012. 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, benefits under Medicare Part A during the 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 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 further modified that section of the Act. Section PO 00000 Frm 00204 Fmt 4701 Sfmt 4700 1886(d)(12)(D) of the Act, as modified, revises 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 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 a 0percent additional payment adjustment for hospitals with more than 1,600 Medicare discharges. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 and 50414), we revised our regulations at 42 CFR 412.101 to reflect the changes to the payment adjustment for low-volume hospitals provided for by the provisions of the Affordable Care Act. We also clarified 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. Furthermore, we established a procedure for a hospital to request low-volume hospital status. Specifically, in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50238 and E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 50414), we revised our regulations at § 412.101(b)(2)(ii) to provide that, to qualify for the low-volume payment adjustment in FYs 2011 and 2012, a hospital must be located more than 15 road miles from the nearest subsection (d) hospital. We also defined, at § 412.101(a), the term ‘‘road miles’’ to mean ‘‘miles’’ as defined at § 412.92(c)(i). This change in the qualifying criteria from 25 to 15 road miles is applicable only for FYs 2011 and 2012, but the definition of ‘‘road miles’’ continues to apply even after the distance requirement reverts to 25 road miles beginning in FY 2013. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50239 and 50414), we revised our regulations at § 412.101(b)(2)(ii) to provide that, to qualify for the low-volume adjustment in FYs 2011 and 2012, a hospital must have fewer than 1,600 ‘‘Medicare discharges’’ during the fiscal year based on the hospital’s Medicare discharges from the most recently available MedPAR data as determined by CMS. We also revised the regulations to specify at § 412.101(a) that the term ‘‘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.’’ In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50240 through 50241), we adopted a continuous linear sliding scale equation 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, for FYs 2011 and 2012 for eligible lowvolume hospitals with 200 or fewer Medicare discharges, we established a low-volume payment adjustment of 25 percent. Under the regulations at § 412.101(c)(2), for FYs 2011 and 2012, the low-volume adjustment is 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)]. For VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 additional information on the mathematical interpretation of this formula, we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50241). While we revised 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 also noted in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50240) that we did not modify the process for requesting and obtaining the low-volume hospital payment adjustment. In general, in order to qualify for the low-volume hospital payment adjustment, a hospital must provide to its fiscal intermediary or MAC sufficient evidence to document that it meets the discharge 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 applicable 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 hospital status, in order to determine whether or not the hospital meets the qualifying criteria. 3. Discharge Data Source To Identify Qualifying Low-Volume Hospitals and Calculate the Payment Adjustment (Percentage Increase) for FY 2012 As described above, for FYs 2005 through 2010 and FY 2013 and subsequent years, since the discharge determination is made based on the hospital’s number of total discharges, the hospital’s most recently submitted cost report is used to determine if the hospital meets the criteria to receive the low-volume payment adjustment in the current year (§ 412.101(b)(2)(i)). For FYs 2011 and 2012, the hospital’s Medicare discharges from the most recently available MedPAR data, as determined by CMS, are used to determine if the hospital meets the discharge criteria to receive the low-volume payment adjustment in the current year (§ 412.101(b)(2)(ii)). As also described above, the applicable low-volume percentage increase is determined using a continuous linear sliding scale equation that results in a low-volume adjustment ranging from an additional 25 percent for hospitals with 200 or fewer Medicare discharges to a 0 percent additional payment adjustment for hospitals with 1,600 or more Medicare discharges. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50241), we established that, PO 00000 Frm 00205 Fmt 4701 Sfmt 4700 51679 for FY 2011, the low-volume payment adjustment would be determined using Medicare discharge data for FY 2009 from the March 2010 update of the MedPAR files, as these were the most recent available data. We also stated that we expected to use Medicare claims data from FY 2010 to determine the lowvolume payment adjustment for FY 2012, as these would be the most recent available data at that time. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25941), we proposed that, for FY 2012, qualifying low-volume hospitals and their payment adjustment would be determined using Medicare discharge data from the most recent update of the FY 2010 MedPAR file, that is, the December 2010 update, as these data were the most recent data available at that time. We also proposed that if more recent FY 2010 Medicare discharge data are available (such as data from the March 2011 update of the MedPAR files), we would use such data in the final rule. Table 14 in the proposed rule (which was listed in section VI. of the Addendum to the proposed rule and available via the Internet) listed the ‘‘subsection (d)’’ hospitals with fewer than 1,600 Medicare discharges based on the December 2010 update of the FY 2010 MedPAR files and their proposed FY 2012 low-volume payment adjustment. We noted that eligibility for the proposed low-volume payment adjustment for FY 2012 is also dependent upon meeting (if the hospital is qualifying for the low-volume payment adjustment for the first time in FY 2012), or continuing to meet (if the hospital qualified in FY 2011) the mileage criteria specified at § 412.101(b)(2)(ii). In addition, we proposed a procedure for a hospital to request low-volume hospital status for FY 2012 (as described below). Comment: Commenters supported the proposal to update the Medicare discharge data upon which to base the low-volume hospital adjustment for FY 2012 (we note that there were no public comments opposed to the proposal). In addition, a few commenters urged CMS to explore ways to continue increased payments to the hospitals that received additional payments in FYs 2011 and 2012 under the temporary expansion of the low-volume hospital adjustment provided for by the Affordable Care Act rather than revert to the prior lowvolume hospital adjustment policy for FY 2013 and subsequent years. Response: We appreciate the commenters’ support. We are finalizing our proposal to determine the FY 2012 low-volume hospitals and their payment adjustments based on the number of E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51680 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Medicare discharges from the most recent update of the FY 2010 MedPAR file. Specifically, we will make these determinations using the March 2011 update, as these data are the most recent data available. Table 14, which is referenced in section VI. of the Addendum to this final rule and available via the Internet on the CMS Web site, lists the ‘‘subsection (d)’’ hospitals with fewer than 1,600 Medicare discharges based on the March 2011 update of the FY 2010 MedPAR file and their payment adjustments for FY 2012. The eligibility for the lowvolume payment adjustment for FY 2012 is also dependent upon meeting (if the hospital is qualifying for the lowvolume payment adjustment for the first time in FY 2012), or continuing to meet (if the hospital qualified in FY 2011) the mileage criteria specified at § 412.101(b)(2)(ii). With regard to commenters who urged CMS to explore ways to continue the enhanced low-volume hospital payment adjustment beyond FYs 2011 and 2012, we note that the statute restricts the temporary increases in the low-volume payment adjustments to FYs 2011 and 2012. Therefore, beginning with FY 2013, the low-volume hospital qualifying criteria and the amount of the payment adjustment to such hospitals will revert back to those policies that were in effect prior to the amendments made by the Affordable Care Act. We note that the list of hospitals with fewer than 1,600 Medicare discharges in Table 14 does not reflect whether or not the hospital meets the mileage criterion, and a hospital also must be located more than 15 road miles from any other IPPS hospital in order to qualify for a low-volume hospital payment adjustment in FY 2012. In order to receive a low-volume hospital payment adjustment under § 412.101, a hospital must notify and provide documentation to its fiscal intermediary or MAC that it meets the 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 the mileage criterion. If not, the fiscal intermediary or MAC will follow up with the hospital to obtain additional necessary information to determine VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 whether or not the hospital meets the low-volume mileage criterion. In addition, the fiscal intermediary or MAC will refer to the hospital’s Medicare discharge data determined by CMS (for FY 2012 as shown in Table 14 of this final rule (which is listed in section VI. of the Addendum to this final rule and available via the Internet)), 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 Table 14, as well as the Medicare discharge data for all ‘‘subsection (d)’’ hospitals with claims in the March 2011 update of the FY 2010 MedPAR file, is also available on the CMS Web site for hospitals to check their Medicare discharges to help them to decide whether or not to apply for low-volume hospital status. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25941), we proposed that for FY 2012, a hospital must make its request for low-volume hospital status in writing to its fiscal intermediary or MAC by September 1, 2011, in order for the applicable lowvolume percentage add-on to be applied to payments for its discharges beginning on or after October 1, 2011. This proposal is similar to the policy we established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 20574 through 20575). We did not receive any public comments on this proposed procedure. Therefore, in this final rule, we are finalizing this procedure for a hospital to request low-volume hospital status for FY 2012. We also are finalizing our proposal that a hospital that qualified for the low-volume payment adjustment in FY 2011 may continue to receive a low-volume payment adjustment in FY 2012, without reapplying, if it continues to meet the Medicare discharge criterion, based on the latest available FY 2010 MedPAR data (as finalized above and shown in Table 14) and the distance criterion. 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 ‘‘subsection (d)’’ hospital no later than September 30, 2011. Further, similar to the policy we established for FY 2011 (Transmittal 2060, Change Request 7134; October 1, 2010), we are finalizing our proposal with regard to requests for low-volume hospital status for FY 2012 received after September 1, 2011. In such cases, if the hospital meets the criteria to qualify as a lowvolume hospital, the fiscal intermediary or MAC will apply the applicable low- PO 00000 Frm 00206 Fmt 4701 Sfmt 4700 volume adjustment in determining payments to the hospital’s FY 2012 discharges prospectively within 30 days of the date of the fiscal intermediary’s or MAC’s low-volume status determination. F. 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. Changes to the policies regarding counting residents for both IME and direct GME payment purposes as a result of the implementation of sections 5503 through 5506 of the Affordable Care Act were issued in a final rule published in the Federal Register on November 24, 2010 (75 FR 72133). 2. IME Adjustment Factor for FY 2012 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 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 2012, the formula multiplier is 1.35. We estimate that application of this formula multiplier for the FY 2012 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. Comment: Several commenters supported CMS’ proposal to maintain the IME formula multiplier at 1.35. Commenters stated they support the continued IME adjustment factor because IME payments are an important part of guaranteeing both a strong cardiothoracic surgery and general surgery workforce, both of which are currently facing increasing shortages. Another commenter stated that it supported maintaining the current level of IME payments because it is an important funding source for safety net teaching hospitals. Response: We appreciate the commenters’ support. We note that the IME formula multiplier is set by Congress; any change to the multiplier would require a legislative change. Therefore, we are finalizing our proposal that the IME formula multiplier for FY 2012 be set at 1.35, which we estimate will result in an increase in IPPS payments of 5.5 percent for every approximately 10percent increase in the hospital’s resident-to-bed ratio. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 G. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) and Indirect Medical Education (IME) (§§ 412.105 and 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 the most common, is based on a complex statutory formula under which the DSH payment adjustment is based on the hospital’s geographic designation, the number of beds in the hospital, and the level of the hospital’s disproportionate patient percentage (DPP). A hospital’s DPP is the sum of two fractions: the ‘‘Medicare fraction’’ and the ‘‘Medicaid fraction.’’ The Medicare fraction (also known as the ‘‘SSI fraction’’ or ‘‘SSI ratio’’) is computed by dividing the number of the hospital’s inpatient days that are furnished to patients who were entitled to both Medicare Part A (including patients who are enrolled in a Medicare Advantage (Part C) plan) and Supplemental Security Income (SSI) benefits by the hospital’s total number of patient days furnished to patients entitled to benefits under Medicare Part A (including patients who are enrolled in a Medicare Advantage (Part C) plan). The Medicaid fraction is computed by dividing the hospital’s number of inpatient days furnished to patients who, for such days, were eligible for 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 § 412.106 govern the Medicare DSH payment adjustment and specify how the DPP is calculated PO 00000 Frm 00207 Fmt 4701 Sfmt 4700 51681 as well as how beds and patient days are counted in determining the Medicare DSH payment adjustment. Under § 412.106(a)(1)(i), the number of beds for the Medicare DSH payment adjustment is determined in accordance with bed counting rules for the IME adjustment under § 412.105(b). As we did in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25942), we are combining, under section IV.G.2. of this preamble, our discussion of changes to the policies for counting beds in relation to the calculations for the IME adjustment at § 412.105(b) and the DSH payment adjustment at § 412.106(a)(1)(i) and for counting patient days for purposes of the DSH payment adjustment at § 412.106(a)(1)(ii). 2. Policy Change Relating to the Exclusion of Hospice Beds and Patient Days From the Calculation of the Medicare DSH Payment Adjustment and the IME Payment Adjustment a. Background As discussed in the FY 2004 IPPS final rule (68 FR 45415 through 45420), when determining a hospital’s Medicare DSH payment, our policy is to include patient days in hospital units or wards that would be directly included in determining the allowable costs of inpatient hospital care payable under the IPPS on the Medicare cost report. Under this policy, CMS uses the level of care generally provided in such a unit or ward as a proxy for determining the level of care provided to a particular patient on a particular day within that unit. As stated in the FY 2004 IPPS final rule, our policy is ‘‘not intended to focus on the level or type of care provided to individual patients in a unit, but rather on the level and type of care provided in the unit as a whole.’’ (68 FR 45417) In the FY 2005 IPPS final rule, we amended this policy to specifically exclude observation and swing days from the patient day count. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25942 and 25943), we proposed to establish an additional exclusion with respect to counting bed days and patient days for patients receiving hospice services in an inpatient setting of a hospital. b. Hospice Inpatient Services Section 1861(dd)(1) of the Act defines hospice care to include a limited set of ‘‘items and services provided to a terminally ill individual by, or by others under arrangements made by, a hospice program under a written plan (for providing such care to such individual) established and periodically reviewed by the individual’s attending physician E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51682 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations and by the medical director.’’ Among those items and services specified under section 1861(dd)(1)(G) of the Act is ‘‘short-term inpatient care (including both respite care and procedures necessary for pain control and acute and chronic symptom management) in an inpatient facility meeting such conditions as the Secretary determines to be appropriate to provide such care, but such respite care may be provided only on an intermittent, nonroutine, and occasional basis and may not be provided consecutively over longer than five days.’’ Based on these statutory definitions of hospice care, the Secretary, through regulation at § 418.302, has grouped hospice care services into four categories for payment purposes. Two of these payment categories describe hospice services in an inpatient setting: Inpatient respite care day and general inpatient care day. Section 418.302(b)(3) of the regulations defines an inpatient respite care day as ‘‘a day on which the individual who has elected hospice care receives care in an approved facility on a short-term basis for respite.’’ Section 40.2.2 of Chapter 9 of the Medicare Benefit Policy Manual (https:// www.cms.gov/manuals/Downloads/ bp102c09.pdf) further describes an inpatient respite care day as a shortterm inpatient day provided only when necessary to relieve family members or other caregivers caring for the individual at home. Under the Act, inpatient respite care is limited to 5 consecutive days for a given stay. Similarly, the regulations at § 418.302(b)(4) describe a general inpatient care day as ‘‘a day on which an individual who has elected hospice care receives general inpatient care in an inpatient facility for pain control or acute or chronic symptom management which cannot be managed in other settings.’’ Section 40.1.5 of Chapter 9 of the Medicare Benefit Policy Manual provides that general inpatient care is appropriate when care for pain control or acute or chronic symptom management cannot feasibly be provided in another setting. This section of the Medicare Benefit Policy Manual further states that such care is ‘‘not equivalent to a hospital level of care.’’ That hospice care is not hospital level care is further supported by the provision at § 418.202(e), which provides that general inpatient care and inpatient respite care hospice services can be ‘‘provided in a participating hospice inpatient unit, or a participating hospital or [skilled nursing facility], that additionally meets the standards in § 418.202(a) and (e) regarding staffing VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 and patient areas * * * [and] must conform to the [hospice provider’s] written plan of care.’’ Furthermore, hospice services provided in an inpatient hospital setting are not payable under the IPPS. Rather, at this time, these services are payable under two of the four prospectively determined all-inclusive categories of care under the hospice payment system. In the FY 2004 IPPS final rule (68 FR 45418), we stated that we believed it ‘‘reasonable to interpret the phrase ‘hospital’s patient days,’ to mean only the hospital’s inpatient days at a level of care that would be covered under the IPPS as a means to determine an IPPS payment adjustment.’’ In that rule, we acknowledged that it would be ‘‘administratively inefficient and impracticable’’ to calculate a hospital’ inpatient days based on a determination of whether a particular patient in a particular inpatient bed for a particular stay is receiving a level of care that would be covered under the IPPS (68 FR 45418). Accordingly, we adopted a policy under which we use the level of care that is generally provided in particular units or wards as a proxy for determining whether the care provided to a particular patient is of a type that would be covered under the IPPS. However, we have recognized exceptions to this policy for certain categories of nonacute care, even if that care is provided in an acute care unit. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to revise § 412.106(a)(1)(ii) to exclude patient days associated with hospice patients receiving inpatient hospice services in an inpatient hospital setting from the Medicare and Medicaid fractions of the DPP. We also proposed to amend our cost reporting instructions accordingly. Our proposal to exclude hospice inpatient days was analogous to our decision in the FY 2005 IPPS final rule to exclude observation and swingbed days from the Medicare and Medicaid fractions of the DPP. In that rule, we stated that our policies to exclude observation days and swing-bed days from the count of patient days ‘‘stem from the fact that although the services are provided in beds that would otherwise be available to provide an IPPS level of services, these days are not payable under the IPPS * * *’’ (69 FR 49097). Similarly, our proposal to exclude inpatient hospice days stemmed from the fact that these days are not acute care services generally payable under the IPPS. We noted in the proposed rule that, on rare occasions, patients receiving care under a third payment category, routine home care, may also receive PO 00000 Frm 00208 Fmt 4701 Sfmt 4700 services in an inpatient hospital setting. Unlike inpatient respite care or general inpatient services, routine home care services are not intended to be provided in a hospital setting. For the same reasons stated above, such days should also be excluded from the Medicare and Medicaid fractions of the DPP. We also proposed to exclude from the hospital’s bed count days associated with hospice patients who receive inpatient hospice services in the hospital for purposes of both the IME payment adjustment and the DSH payment adjustment. The rules for counting hospital beds for the purposes of the IME adjustment are codified in the IME regulations at § 412.105(b), which is cross-referenced in § 412.106(a)(1)(i) for purposes of the DSH payment adjustment. Our bed counting policy is to include bed days available for IPPS-level acute care hospital services. Inpatient hospice services provided in an acute unit or ward are occasional, alternative uses of acute inpatient beds that would otherwise be considered available for IPPS-level acute care hospital services (as long as other criteria for a bed to be considered as an available bed are met under § 412.105(b)). A bed used for inpatient hospice services on a given day is not available to be used for IPPSlevel services. Therefore, we proposed to revise § 412.105(b)(4) to state that such hospice days are excluded from the counts of available beds for purposes of the IME payment adjustment. Because the same rules govern the counting of available beds for purposes of the DSH payment adjustment under § 412.106(a)(1)(i), under the proposal, hospice days would also be excluded from the count of available beds for purposes of the DSH payment adjustment. In the proposed rule, we noted that there is a circumstance in which a hospital will provide IPPS-level acute care hospital services to a hospice patient for which it would receive payment under the IPPS. This occurs when a Medicare beneficiary receiving hospice care under his or her hospice benefit requires acute care hospital services to treat a condition unrelated to his or her hospice plan of care. For example, an individual who has elected the hospice benefit could be treated in the inpatient hospital setting for a condition or illness, such as a broken bone, that is unrelated to his or her terminal illness. Under these circumstances, the patient is receiving acute care hospital services of the sort payable under the IPPS. As such, consistent with § 412.106(a)(1)(ii), we did not propose to exclude these patient E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations days from the Medicare and Medicaid fractions of the DPP or from the count of available beds under § 412.105(b)(4) and § 412.106(a)(1)(i). We further noted that hospitals may have hospice units that are separate and distinct from their acute care inpatient units. Under existing regulations at § 412.105(b)(3) and § 412.106(a)(1)(ii)(A), services provided in distinct nonacute care inpatient units are excluded from the patient day and bed day count. Our proposal with respect to inpatient hospice services did not change or affect this policy. Comment: Several commenters believed that the proposal would have an immaterial impact on providers’ DSH payment adjustments while creating an unnecessary administrative burden to the extent that providers would have to take steps to identify the excluded days. The commenters requested that CMS reevaluate the administrative burden created by the need to identify hospice days in light of what the commenters describe as the immaterial impact of hospice days on the DSH payment adjustments. Response: We do not agree with the commenters that our proposal would create an undue administrative burden for providers. Hospitals already identify hospice patients for the purpose of billing and payment. Because hospice patients in an inpatient setting are already being specifically identified for other purposes, we do not believe it would be an undue administrative burden for hospitals to identify and exclude these patients for purposes of the DSH payment adjustment. Comment: Commenters requested clarification regarding the effective date of the proposal, including whether the regulation change is intended to be prospective. The commenters also questioned whether the change in policy would be reflected on the cost report. Response: Our proposal to exclude hospice bed days from the calculation of the DSH payment adjustment is a regulation change that will be effective for cost reporting periods beginning on or after October 1, 2011. As we stated in the proposed rule, we plan to amend the cost reporting instructions to reflect our change in policy. Comment: A few commenters requested that CMS not apply the intern-to-resident bed (IRB) ratio cap with respect to the proposed removal of hospice bed days from the calculation of the DSH payment adjustment. Instead, the commenters requested that hospitals be allowed to exclude these inpatient hospice days from their prior year’s IRB ratio for purposes of applying that ratio VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 as the cap on the hospital’s current year IRB ratio. Response: We believe the commenters are referring to a provision that was included in the Balanced Budget Act of 1997, known as the cap on the intern and resident-to-bed (IRB) ratio that is applicable to the IME payment that teaching hospitals receive under the IPPS. Under section 1886(d)(5)(B)(vi)(I) of the Act, and implemented in the regulations at § 412.105(a)(1)(i), a hospital’s IRB ratio in the current cost reporting period generally cannot exceed, or is capped by, the value of the IRB ratio in the preceding cost reporting period. Therefore, if a teaching hospital’s IRB ratio increases in the current cost reporting period relative to the prior cost reporting period, its receipt of an increase in IME payment as a result of that increase to the IRB ratio is delayed by 1 year. Because, effective for cost reporting periods beginning on or after October 1, 2011, certain inpatient hospice bed days are to be excluded from the count of available beds under § 412.105(b)(4), assuming there are no changes in the FTE resident count in the numerator of the IRB ratio from the cost reporting period occurring prior to October 1, 2011, a reduced bed count in the cost reporting period that begins on or after October 1, 2011, could cause an increase in the IRB ratio. However, because the prior cost reporting period’s bed count would still reflect the inclusion of the inpatient hospital beds, the IRB ratio for the cost reporting period that begins on or after October 1, 2011 will be capped by the lower IRB ratio from the preceding period, thereby limiting the IME payment somewhat for the cost reporting period that begins on or after October 1, 2011. We do not agree with the commenters’ request to not apply the IRB ratio cap with respect to inpatient hospice days by permitting teaching hospitals to exclude the inpatient hospice days from the denominator of the IRB ratio of the prior period. While it is true that the law and regulations permit teaching hospitals to make adjustments to their prior year IRB ratios under certain circumstances such as for Medicare GME affiliation agreements, new programs, or absorption of residents displaced by another hospital’s closure, we do not believe a similar exception is warranted under this policy. In this instance, no harm is occurring to either the teaching hospital or residents in the GME programs as a result of not including the bed days of hospice inpatients in the denominator of the IRB ratio. Rather, it is simply a matter of receiving an increased IME payment PO 00000 Frm 00209 Fmt 4701 Sfmt 4700 51683 immediately in the current cost reporting period, or, through application of the IRB ratio cap, on a 1-year delay in the following cost reporting period. In fact, the intent of the IRB ratio cap is to modulate such changes in a hospital’s IRB ratio from year to year. Therefore, we are not waiving the IRB ratio cap effective for cost reporting periods that begin on or after October 1, 2011. Comment: One commenter requested that CMS begin implementation of the Affordable Care Act amendments to the DSH payment adjustment provisions of the Act through this rulemaking. Response: We believe that this comment is outside of the scope of the proposed rule. The referenced statutory changes made by the Affordable Care Act do not go into effect in FY 2012 and were not addressed in this year’s proposed rule. After consideration of the public comments we received, we are adopting our proposed policies without modifications. In summary, we are excluding inpatient hospice days from the patient day count under § 412.106(a)(1)(ii) (for DSH) and the bed day count under § 412.105(b) (for IME) and under § 412.106(a)(1)(i) (for DSH). H. 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 for their hospital inpatient services based on the higher of the Federal rate or a blended rate based in part on the Federal rate and in part on the MDH’s hospitalspecific 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. 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. E:\FR\FM\18AUR2.SGM 18AUR2 51684 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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. 2. Extension of the MDH Program As we discussed in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50286 and 50287), 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 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 the FY 2011 IPPS/LTCH PPS final rule (75 FR 50287 and 50414), we amended the regulations at § 412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension of the MDH program through FY 2012. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25944), we did not propose any additional changes to this regulatory text for FY 2012. We did not receive any public comments regarding the extension of the MDH program. 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 certain hospitals incur in connection with the services of certified registered nurse anesthetists (CRNAs). Section 2312(c) provided that pass-through payment 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 Public Law 98–369 by extending the CRNA pass-through 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 1861(bb)(2) of the Act states that the term ‘‘certified registered nurse anesthetist’’ includes an anesthesiologist assistant. 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 pass- PO 00000 Frm 00210 Fmt 4701 Sfmt 4700 through 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– 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 rural location requirement 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 (that is, both CRNAs and anesthesiologist assistants) employed by a hospital or CAH, are located at § 412.113(c). 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 as rural pursuant to section 1886(d)(8)(E) of the Act and § 412.103 of 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. After consideration of the public comments, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50303), we adopted a policy that would allow otherwise eligible critical access hospitals (CAHs) or hospitals, that have reclassified from urban to rural status under section 1886(d)(8)(E) of the Act and 42 CFR 412.103, to receive reasonable cost payments for anesthesia services and related care furnished by qualified nonphysician anesthetists (also referred to in this section as CRNA pass-through payments), effective for cost reporting periods beginning on or after October 1, 2010. After the issuance of the final rule, we received an inquiry from a public commenter who indicated that CMS had misunderstood its submitted comment on the FY 2011 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations IPPS/LTCH PPS proposed rule in which the commenter stated that the policy should be effective on the basis of a calendar year, not a cost reporting period, since as a rule a hospital can only begin receiving CRNA passthrough payments at the beginning of a calendar year. Our response to this public comment in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50303) indicated that it was unnecessary to modify the effective date in the final rule 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.’’ While this statement was accurate, it did not take into account that if a hospital’s cost reporting period begins on or after January 1, 2011, the hospital would be ineligible to receive CRNA pass-through payments until the beginning of the next calendar year, on January 1, 2012. Under the finalized policy in the FY 2011 IPPS/LTCH PPS final rule, hospitals reclassifying from urban to rural areas with cost reporting periods beginning between October 1, 2010, and December 31, 2010, would be able to first receive CRNA pass-through payments effective January 1, 2011, while hospitals with cost reporting periods beginning on or after January 1, 2011, would not be able to receive CRNA pass-through payments until one year later on January 1, 2012. In an interim final rule with comment period included in the Federal Register on November 24, 2010 (75 FR 72256), we stated that our intention in the FY 2011 IPPS/LTCH PPS final rule was not to make the provision for CRNA passthrough payment for anesthesia services and related care furnished by qualified nonphysician anesthetists effective January 1, 2011, for some hospitals and CAHs and January 1, 2012, for other hospitals and CAHs. We stated our belief that the provision would be more equitable if it had a uniform effective date for all eligible hospitals and CAHs. While we considered changing the effective date to January 1, 2011, for all hospitals and CAHs to begin receiving CRNA pass-through payments under this provision, we noted that our regulations at 42 CFR 412.113(c)(2)(iii) state that the hospital or CAH must demonstrate to its fiscal intermediary prior to the start of the calendar year that it meets the requirements for receiving CRNA pass-through payments. For this reason, we stated our belief that the best option was to adopt an effective date of December 2, 2010, for all hospitals and CAHs, which we provided for in the interim final rule with VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 comment period. With an effective date of December 2, 2010, any hospital or CAH, regardless of its specific fiscal year beginning date, was provided the opportunity to demonstrate prior to January 1, 2011, that it met the requirements for receiving CRNA passthrough payments beginning January 1, 2011. In the interim final rule with comment period, we amended the regulations at § 412.113(c)(2)(i)(A) to provide for an effective date of December 2, 2010, for all eligible hospitals and CAHs to receive CRNA pass-through payments for anesthesia services and related care furnished by qualified nonphysician anesthetists. As we indicated in the FY 2012 IPPS/ LTCH PPS proposed rule, in this final rule, we are responding to the one public comment received on the interim final rule with comment period and setting forth our final policy. Comment: One commenter supported CMS’ decision to change the effective date of the policy to December 2, 2010, because this change will allow all eligible hospitals and CAHs to begin receiving CRNA pass-through payments effective January 1, 2011. Response: We appreciabe the commenter’s support. In this final rule, we are finalizing the effective date established in the interim final rule with comment period. We received two additional comments in response to the FY 2012 IPPS/LTCH PPS proposed rule. Comment: One commenter suggested that CMS consider, for future rulemaking, an increase in the limit on the number of procedures and FTE hours that a facility may have and remain qualified for reasonable costbased reimbursement for services furnished by qualified nonphysician anesthetists. The commenter stated that this increase would ensure better coverage for emergency rooms and surgery cases, which would support patient services and improve patient safety and efficiency of treatment. Another commenter stated that while it appreciated and supported changing the regulations to permit CRNA passthrough payments for reclassified hospitals, it urged CMS to permit hospitals in Lugar counties the same benefit. Response: Because we did not propose any further changes to the CRNA pass-through payment policy in the FY 2012 IPPS/LTCH PPS proposed rule, we consider these comments to be outside the scope of the proposed rule. Therefore, we are not responding to these comments in this final rule. However, we may consider these public PO 00000 Frm 00211 Fmt 4701 Sfmt 4700 51685 comments in the development of future rulemaking. After consideration of the public comments we received, we are finalizing the effective date of December 2, 2010, that was established in the interim final rule with comment period. Effective December 2, 2010, in addition to hospitals and CAHs geographically located in rural areas, as defined in § 412.62(f), and are not deemed to be located in an urban area under § 412.64(b)(3), hospitals and CAHs that have reclassified as rural under the regulations at § 412.103 are also eligible to receive CRNA pass-through payments. J. Additional Payments for Qualifying Hospitals With Lowest Per Enrollee Medicare Spending 1. Background Section 1109 of the Affordable Care Act requires additional payments for FYs 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) It is a ‘‘subsection (d) hospital’’ as defined in section 1886(d)(1)(B) of the Act; and (2) it is 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 the Affordable Care Act makes available $400 million to qualifying hospitals for FY 2011 and FY 2012. Section 1109(c) of the Affordable Care Act 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. Section 1109 is one of several provisions in the Affordable Care Act that addresses concerns about how Medicare makes adjustments for geographic differences in the cost of providing services and geographic variation in the volume and intensity of health care spending. Some other provisions in the Affordable Care Act that relate to concerns about geographic variation in Medicare payments include: • Section 3102(a), which provides a floor of 1.0 on the physician fee schedule work geographic practice cost E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51686 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations index (GPCI) through the end of CY 2010 (later extended by the Medicare and Medicaid Extension Act of 2010 through the end of CY 2011); • Section 3102(b), as amended by section 1108 of the Affordable Care Act, which requires that only one-half of the relative cost differences in employee wages and office rents be reflected in the practice expense GPCIs in 2010 and 2011; • Section 10324, which provides for a floor on the wage index and the practice expense GPCI in frontier States (defined as 50 percent or more of the counties in the State having a population density of less than 6 people per square mile). These provisions provide temporary adjustments in payments while other initiatives are underway to evaluate geographic adjustment factors that are used in Medicare’s payment systems. For instance, section 3101 of the Affordable Care Act requires the Secretary, not later than January 1, 2012, to make appropriate adjustments to the practice expense GPCI considering alternative data sources such as the American Community Survey for the nonphysician employee portion of the GPCI. Section 3137 of the Affordable Care Act requires the Secretary to submit to Congress a report that includes a plan to reform the hospital wage index system under section 1886 of the Act by December 31, 2011. In addition to these provisions, the Secretary has contracted with the Institute of Medicine (IOM) to study the hospital wage index and the physician fee schedule GPCI. The IOM released its first report to CMS on June 1, 2011. The report provides an evaluation and assessment of: (1) The empirical validity of the adjustment factors (the hospital wage index and physician fee schedule GPCI); (2) The methodology used to determine the adjustment factors; (3) Measures used for the adjustment factors, taking into account— • Timeliness of data and frequency of revisions to such data; • Sources of data and the degree to which such data are representative of costs; and • Operational costs of providers who participate in Medicare. The report includes recommendations for the Secretary to consider. It is available on the Web site at: https:// iom.edu/Reports/2011/GeographicAdjustment-in-Medicare-PaymentPhase-I-Improving-Accuracy.aspx. We are looking forward to reviewing IOM’s report and acting expeditiously on its recommendations to improve Medicare’s payment systems and better adjust for geographic differences in the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 cost of hospital labor as well as the cost of operating a physician practice. 2. Methodology for Identifying Qualifying Hospitals and Eligible Counties In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50303 through 50342), we finalized our methodology for distributing the $400 million to qualifying hospitals located in the lowest quartile of counties in per enrollee Medicare spending. First, we provided 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 for the purpose of disbursing the available $400 million. We developed an adjustment model by age, sex, and race, as required under the provisions of section 1109. 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 were applied, we determined the Medicare Part A and Part B spending by county per enrollee. As we explained in the final rule, our methodology for determining the Medicare Part A and Part B spending per enrollee by county adjusted for age, sex, and race is similar to the methodology we use to calculate risk adjustment models for Medicare Advantage (MA) ratesetting. For more information on the methodology we used to calculate the county Medicare per enrollee spending rates, we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50303 through 75 FR 50307). In addition, in the FY 2011 IPPS/ LTCH PPS final rule, we developed a methodology to identify the qualifying hospitals located in each of the eligible counties. As we stated earlier, section 1109 defines a qualifying hospital as a ‘‘subsection (d) hospital’’ (as defined for purposes of section 1886(d) of the Act) that is ‘‘located in’’ an eligible county. 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.’’ Therefore, we excluded Puerto Rico hospitals and CAHs from the provisions of section 1109 because they do not meet the definition of a ‘‘subsection (d) hospital.’’ In the FY 2011 IPPS/LTCH PPS final rule, we identified ‘‘qualifying hospitals’’ based on their Medicare provider number (now referred to as the ‘‘CMS certification number’’ (CCN)) because this number is used by hospitals to identify themselves on their Medicare cost reports. We also provided PO 00000 Frm 00212 Fmt 4701 Sfmt 4700 that, in order to meet the definition of a ‘‘qualifying hospital,’’ the hospital, as identified by its CCN, must: (1) Have existed 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 CCN in FY 2009. We used the Online Survey, Certification and Reporting (OSCAR) database to determine a hospital’s county location associated with that CCN. We also specified that the address listed for a hospital’s CCN must be currently located in a qualifying county in order for a hospital to meet the definition of a ‘‘qualifying hospital.’’ For more information on how we identified the qualifying hospitals, we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50307 and 50308). We note that we did not propose to clarify, nor in this final rule are we clarifying, the application of our definition in section IV.J.4. of this preamble. 3. Determination of Annual Payment Amounts The third step in the implementation of section 1109 of the Affordable Care Act required that we determine the payment amount that each qualifying hospital would receive. Specifically, section 1109(c) of the Affordable Care Act required that the payment amount for a qualifying hospital 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.’’ As specified in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50310 through 50312), we determined that a qualifying hospital’s payment amount will be 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. The FY 2009 IPPS operating payments made under section 1886(d) of the Act includes 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 this preamble as the IPPS operating payment amount). We used the March 2010 update of the FY 2009 MedPAR hospital inpatient claims data to determine the IPPS operating payment amounts for each qualifying hospital in order to calculate the proportion of money that each qualifying hospital E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 would receive under this provision. For more information on the methodology we used to calculate the payment determinations, we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50310 through 75 FR 50312). 4. Eligible Counties and Qualifying Hospitals In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50312 through 50342), we published the list of eligible counties, that is, the lowest quartile of counties with Medicare Part A and Part B spending per enrollee adjusted for age, sex, and race, the qualifying hospitals located in those counties, and the qualifying hospitals’ payment weighting factors, for purposes of making payments under section 1109 for FY 2011 and FY 2012. We identified 3,142 counties in the United States. Therefore, there are 786 eligible counties (rounded from 785.5 eligible counties). Of those 786 eligible counties, there are only 273 counties in which qualifying hospitals are located, using the methodology that we finalized in the FY 2011 IPPS/LTCH PPS final rule. Using CCNs, we identified 416 IPPS hospitals that are currently located in those eligible counties and that received IPPS operating payments in FY 2009. In response to public comments on the FY 2011 IPPS/LTCH PPS proposed rule, in the FY 2011 IPPS/LTCH PPS final rule, we corrected the list of eligible counties by replacing two counties on our list of eligible counties (adding Crooks County, OR and Bottineu County, ND). However, we did not identify any qualifying hospitals located in those two eligible counties. Therefore, we provided the public an opportunity to notify CMS by August 30, 2010, if there were any qualifying IPPS hospitals located in either of the two newly added counties. We stated that if we added qualifying hospitals in these counties as a result of accurate notification from the public, we would publish a revised list of qualifying hospitals and their payment weighting factors on the CMS Web site after August 30, 2010. We did not receive any public comments that there were qualifying hospitals located in Crooks County, OR or Bottineu County, ND. Therefore, the list of eligible counties and qualifying hospitals that was finalized in Tables 1 and 2 in the FY 2011 IPPS/LTCH PPS final rule remained valid for distribution of payments under section 1109 for FY 2011 and FY 2012. In auditing our determination of qualifying hospitals prior to the distribution of payments for FY 2011, we found that the following providers VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 on the list of qualifying hospitals which we finalized in the FY 2011 IPPS/LTCH PPS final rule were not subsection (d) hospitals in FY 2011: CMS Certification No. Provider name 110231 ........... Landmark Hospital of Athens LLC. Bonner General Hospital. SW Idaho Advanced Care. Complex Care Hospital of Idaho. Continuing Care Hospital at St. Luke’s. Calhoun Health Services. Select Specialty Hospital— Springfield Inc. Holy Rosary Healthcare. Advanced Care of South New Mexico. Amsterdam Memorial Hospital. Providence St. Peter Chemical Dependency Center. 130024 ........... 130069 ........... 130070 ........... 160156 ........... 250112 ........... 260221 ........... 270002 ........... 320088 ........... 330010 ........... 500143 ........... Because these providers were not subsection (d) hospitals in FY 2011, the statute precludes them from being qualifying hospitals eligible to receive section 1109 payments for FY 2011. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25947), we proposed to clarify that, in applying our definition of qualifying hospitals for making payments under section 1109 of the Affordable Care Act, these 11 providers (and other providers that do not meet the statutory definition) are not qualifying hospitals and, therefore, are removed from the list of qualifying hospitals. Furthermore, we proposed to clarify that, in order to meet the definition of ‘‘qualifying hospital’’ under section 1109 for FY 2012, a hospital that is on the list of qualifying hospitals in the proposed rule must meet the statutory criteria of a ‘‘qualifying hospital’’ for some portion of FY 2012 (a hospital must be a subsection (d) hospital for some part of FY 2012). In addition, we noted that, prior to the issuance of the FY 2012 final rule and prior to making section 1109 payments for FY 2012, we intend to review ` providers’ status vis-a-vis the statutory definition of qualifying hospital. Accordingly, we noted that, in this FY 2012 final rule and again prior to distribution of section 1109 payments for FY 2012, we would update the list of qualifying hospitals and payment weighting factors based on these findings. We indicated that, in addition to the opportunity to submit comments on the proposed rule, we were proposing to provide hospitals an opportunity after the FY 2012 IPPS rulemaking cycle to notify CMS whether PO 00000 Frm 00213 Fmt 4701 Sfmt 4700 51687 any qualifying hospitals removed from the list have been removed in error and to notify CMS if a hospital is on the list of qualifying hospitals and will not be a qualifying hospital (for example, a subsection (d) hospital) for any or all part of FY 2012. We also stated that the public would be allowed to submit input on these two topics via e-mail to Nisha Bhat, nisha.bhat@cms.hhs.gov. All information, including relevant documentation, must be received by November 1, 2011. 5. Payment Determinations and Distributions for FY 2011 and FY 2012 Under section 1109(b) of the Affordable Care Act, the total pool of payments available to qualifying hospitals for FY 2011 and FY 2012 is $400 million. In the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50308 through 50310), we stated that we would distribute $150 million for FY 2011 and $250 million for FY 2012. We stated that we would distribute payments to the qualifying hospitals through an annual one-time payment during each of FY 2011 and FY 2012 through their Medicare contractor (fiscal intermediary or MAC). We instructed qualifying hospitals to report these additional payments on their Medicare hospital cost report corresponding to the appropriate cost reporting period that the hospitals receive the payments and that hospitals should report these payments on the ‘‘Other adjustment’’ line on Worksheet E, Part A of the Medicare hospital cost report Form 2552. We noted that we require these payments to be reported on the cost report for tracking purposes only and that these additional payments will not be adjusted or settled by the fiscal intermediary or MAC on the cost report. In the FY 2012 IPPS/LTCH PPS proposed rule, we noted that at the time of the issuance of the proposed rule, we had not yet made the payments to the qualifying hospitals for FY 2011. As we stated in the FY 2011 IPPS/LTCH PPS final rule, and again in the FY 2012 proposed rule, we will make the FY 2011 payments during FY 2011 (that is, by September 30, 2011). However, in the proposed rule, we indicated that we were notifying the public that we intended to change the method we would use to distribute the payment for FY 2011 and FY 2012, in order to ease the reporting burden on hospitals. Rather than making a one-time annual payment to the qualifying hospitals through their Medicare contractor using the Medicare cost report, in the proposed rule, we indicated that we planned to make payments to the qualifying hospitals through a one-time E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51688 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations annual payment made by one Medicare contractor who would directly pay all of the qualifying hospitals. We stated that we would send each qualifying hospital a letter stating the specifics of how the hospital will receive its payments. Because these one-time annual payments would be made through a special process outside of the scope of normal payments by their Medicare contractor, the hospitals’ Medicare contractor would no longer need to track the payment amounts made to the hospitals under this provision. We believed this would simplify and expedite the payment process so that one Medicare contractor is responsible for overseeing the distribution of payments. In addition, we believed that this simplified process would ease the administrative burden within CMS to track that payments have been properly made to the qualifying hospitals. In addition, the burden to hospitals is reduced because hospitals would no longer have to report these additional payments on their Medicare hospital cost report corresponding to the appropriate cost reporting period for which the hospitals receive payments in FY 2011 or FY 2012 (as we instructed in the FY 2011 IPPS/LTCH PPS final rule and note above). In the FY 2011 IPPS/LTCH PPS final rule, we also stated that we would make only one determination of eligible counties and qualifying hospitals for FY 2011 and FY 2012, with the caveat that we would accept additional public input on the limited issue of whether there are any qualifying hospitals in the two newly identified eligible counties. As we stated earlier, we did not receive any public input on qualifying hospitals for the two newly identified eligible counties. However, as we describe above, 11 hospitals that were included on the list of qualifying hospitals do not meet the statutory criteria in section 1109 of the Affordable Care Act. Therefore, in the proposed rule, we proposed to revise our list of qualifying hospitals and their payment weighting factors finalized in the FY 2011 IPPS/ LTCH PPS final rule to exclude these 11 hospitals. As explained in the FY 2011 IPPS/LTCH PPS final rule, we finalized in that rule (to the best of our ability) the list of eligible counties and qualifying hospitals once for ease of implementation of the section 1109 provision and to allow hospitals to plan their budgets accordingly. We indicated that the proposed revision of our determination to exclude these 11 hospitals would result in changes to the payment weighting factors. We proposed to update the payment VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 weighting factors accordingly. Therefore, we proposed to distribute the remaining $250 million in FY 2012 to those qualifying hospitals included in the proposed rule based on the payment weighting factors proposed in the proposed rule. In addition, in order to distribute the section 1109 payments for FY 2011 in as timely a manner as possible, we indicated that we intended to make preliminary section 1109 payments for FY 2011 using the proposed list of qualifying providers and payment weighting factors using the payment method described above. We stated that if additional hospitals are deleted from the proposed list of qualifying hospitals for FY 2011 because they do not meet the statutory criteria, the payment weighting factors would need additional revision. If this situation occurs, we proposed to further amend the payment weighting factors for payments to be made in FY 2012 so that each qualifying hospital receives its appropriate share of the total $400 million. We referred readers to the CMS Web site at: https://www.cms.gov/Acute InpatientPPS/TopOfPage for the tables listed below. The tables were included collectively as the ‘‘Section 1109 Files’’ for the FY 2012 IPPS/LTCH proposed rule. • The final list of eligible counties that was published in the FY 2011 IPPS/ LTCH PPS final rule. We noted that we were not updating this table. • The finalized list of qualifying hospitals, location, and payment weighting factors (based on the March 2010 update of the FY 2009 MedPAR file); based on the proposed clarifications described above for FY 2011. • The distribution of the $400 million for FY 2011 and FY 2012 by State based on the proposed list of qualifying hospitals, location, and payment weighting factors. We noted that the Web address for this Web site was effective as of April 19, 2011, and that, in the future, these tables may be archived to the Web site at: https://www.cms.gov/AcuteInpatient PPS/FFD/list.asp#TopOfPage. Comment: Commenters supported CMS’ continuation of its policy to distribute the remaining of the $400 million allocated under the provision of section 1109 of the Act in FY 2012. Commenters also supported CMS’ proposal to make one-time annual payments through one Medicare contractor rather than individual Medicare contractors. Commenters asked CMS to provide the name and the contact information of the contractor who will be making the one-time annual PO 00000 Frm 00214 Fmt 4701 Sfmt 4700 payments to the qualifying hospitals. In addition, commenters urged CMS to notify the qualifying hospitals of the timing of their FY 2011 and FY 2012 payments. Response: We appreciate the commenters’ support of the implementation of the section 1109 provision. Qualifying hospitals received their share of the $150 million for their FY 2011 payments on July 14, 2011. The payments were made directly to the hospitals by one Medicare contractor. We will continue this payment process for FY 2012. If hospitals have questions with regard to this process, they can contact their Medicare contractor or CMS directly. As we proposed, we are providing hospitals, in addition to the opportunity to submit comments on the proposed rule, the opportunity after the FY 2012 IPPS rulemaking cycle to notify CMS as to whether any qualifying hospitals removed from the list have been removed in error and to notify CMS if a hospital is on the list of qualifying hospitals and will not be a qualifying hospital (for example, a subsection (d) hospital) for any part of FY 2012. The public is allowed to submit input on these two topics via e-mail to Nisha Bhat, nisha.bhat@cms.hhs.gov by November 1, 2011. Given the November 1, 2011 deadline for hospitals to comment on the list of qualifying hospitals to receive section 1109 payments for FY 2012, we plan to distribute $250 million to the qualifying hospitals for FY 2012 in the end of 2011 or early 2012. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25947), we identified 11 providers that were not subsection(d) hospitals in FY 2011 and, therefore, do not qualify to receive section 1109 payments for FY 2011. In preparation of this final rule, we again reviewed our list of qualifying hospitals and have found that an additional hospital, Columbia Regional Hospital (CNN 260178), has not been a subsection(d) hospital for any part of FY 2011 and, therefore, does not meet the statutory criteria to receive payments under section 1109 for FY 2011 and FY 2012. We have revised the list of qualifying hospitals and their payment weighting factors for FY 2011 accordingly. In addition, we found that the following hospitals have converted to become CAHs during FY 2011 and will not be subsection (d) hospitals in FY 2012. CMS Certification No. Provider name 200032 ......... Stephens Memorial Hospital. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations CMS Certification No. 320069 ......... Provider name Miners’ Colfax Medical Center. Thus, these two hospitals will receive payments under section 1109 for FY 2011 but they will no longer qualify to receive payments for FY 2012. We have posted the list of qualifying hospitals and payment weighting factors for FY 2012 on the CMS Web site. We refer readers to the CMS Web site at: https://www.cms.gov/AcuteInpatient PPS/TopOfPage for the tables listed below. The tables are included collectively as the ‘‘Section 1109 Files’’ for the FY 2012 IPPS/LTCH final rule. • The final list of eligible counties that was published in the FY 2011 IPPS/ LTCH PPS final rule. We note that we were not updating this table. • The finalized list of qualifying hospitals, location, and payment weighting factors (based on the March 2010 update of the FY 2009 MedPAR file); based on the clarifications finalized above for FY 2011. • The proposed list of qualifying hospitals, location, and payment weighting factors (based on the March 2010 update of the FY 2009 MedPAR file) based on the clarifications above for FY 2012. The final list of qualifying hospitals, location, and payment weighting factors for FY 2012 will be posted after comments on the accuracy of the list of qualifying hospitals are received and evaluated after November 1, 2011. • The distribution of the $400 million for FY 2011 and FY 2012 by State based on the proposed list of qualifying hospitals, location, and payment weighting factors. The Web address for this Web site is effective on the date of display of this final rule and, in the future, these tables may be archived to the Web site at: https://www.cms.gov/ AcuteInpatientPPS/FFD/ list.asp#TopOfPage. mstockstill on DSK4VPTVN1PROD with RULES2 K. Changes in the Inpatient Hospital Update 1. FY 2012 Inpatient Hospital Update In accordance with section 1886(b)(3)(B)(i) of the Act, each year we update the national standardized amount for hospital 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 subsection (d) hospitals (hereafter referred to as ‘‘IPPS VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 hospitals’’) in all areas, subject to the hospital submitting quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act. For hospitals that did not provide these data, the update was equal to the market basket percentage increase less an additional 2.0 percentage points. The update for the hospital-specific rates for SCHs and MDHs is set by section 1886(b)(3)(B)(iv) of the Act as discussed further below. As discussed below in section IV.K.3. of this preamble, section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, sets the applicable percentage increase under the IPPS for FY 2012 as equal to the rate-of increase in the hospital market basket for IPPS hospitals in all areas (which is currently based on the second quarter 2011 forecast of the FY 2006-based IPPS market basket), subject to a reduction of 2.0 percentage points if the hospital fails to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act, and then subject to an adjustment based on changes in economy-wide productivity (the multifactor productivity (MFP) adjustment), and an additional reduction of 0.1 percentage point. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that application of the MFP adjustment and the additional FY 2012 adjustment of 0.1 percentage point may result in the applicable percentage increase being less than zero. In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25949), based on IHS Global Insight, Inc.’s (IGI’s) first quarter 2011 forecast of multifactor productivity (MFP), we proposed an MFP adjustment (the 10-year moving average of MFP for the period ending FY 2012) of 1.2 percent. Consistent with current law, and based on IGI’s first quarter 2011 forecast of the FY 2012 market basket increase, we proposed an applicable percentage increase to the FY 2012 operating standardized amount of 1.5 percent (that is, the FY 2012 estimate of the market basket rate-of-increase of 2.8 percent less an adjustment of 1.2 percentage points for economy-wide productivity and less 0.1 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, we PO 00000 Frm 00215 Fmt 4701 Sfmt 4700 51689 proposed an applicable percentage increase to the operating standardized amount of ¥0.5 percent (that is, the FY 2012 estimate of the market basket rateof-increase of 2.8 percent, less 2.0 percentage points for failure to submit quality data, less an adjustment of 1.2 percentage points for economy-wide productivity, and less an additional adjustment of 0.1 percentage point). We did not receive any public comments on these proposals to implement the applicable percentage increase. However, we did receive public comments concerning our proposed MFP adjustment. We address these public comments in section IV.K.3. of this preamble. For this final rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, we are finalizing an applicable percentage increase to the FY 2012 operating standardized amount of 1.9 percent (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent less an adjustment of 1.0 percentage point for economy-wide productivity and less 0.1 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, we are finalizing an applicable percentage increase to the operating standardized amount of ¥0.1 percent (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent, less 2.0 percentage points for failure to submit quality data, less an adjustment of 1.0 percentage point for economy-wide productivity, and less an additional adjustment of 0.1 percentage point). We note that, for the proposed rule, we used the first quarter 2011 forecast of the FY 2006-based IPPS market basket rate-of-increase. For this final rule, we used the most recent data available, which was the second quarter 2011 forecast of the FY 2006-based IPPS market basket rate-of-increase. Similarly, for the proposed rule, we used IGI’s first quarter 2011 forecast of MFP. For this final rule, we used the most recent data available, which was IGI’s second quarter 2011 forecast of MFP. We also note that between the proposed and final rules, we also incorporated Bureau of Labor Statistics (BLS) revised historical data for MFP from 1987 to 2010, with 2010 being a preliminary value. In the proposed rule, we proposed to revise the existing regulations at 42 CFR 412.64(d) to reflect the current law. Specifically, in accordance with section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we proposed to E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51690 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations add a new paragraph (iv) to § 412.64(d)(1) to set the applicable percentage increase to the FY 2012 operating standardized amount as the percentage increase in the market basket index, subject to a reduction of 2.0 percentage points if the hospital fails to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act, and then subject to a multifactor productivity adjustment and, lastly, subject to the additional reduction of 0.1 percentage point. We did not receive any public comments on this proposal. Therefore, in this final rule, we are adopting as final, without modification, the proposed changes to § 412.64(d) to reflect current law. Section 1886(b)(3)(B)(iv) of the Act provides that the applicable percentage increase 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). Therefore, 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 sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25949), we proposed an update to the hospitalspecific rates applicable to SCHs and MDHs of 1.5 percent for hospitals that submit quality data or ¥0.5 percent for hospitals that fail to submit quality data. We did not receive any public comments on this proposal. Therefore, for this final rule, we are finalizing an update to the hospital-specific rates applicable to SCHs and MDHs of 1.9 percent for hospitals that submit quality data or ¥0.1 percent for hospitals that fail to submit quality data. As we noted above, for the proposed rule, we used IGI’s first quarter 2011 forecast of the FY 2006-based IPPS market basket rate-ofincrease. For this final rule, we used the most recent data available, which was IGI’s second quarter 2011 forecast of the FY 2006-based IPPS market basket rateof-increase. Similarly, for the proposed rule, we used IGI’s first quarter 2011 forecast of MFP. For this final rule, we used the most recent data available, which was IGI’s second quarter 2011 forecast of MFP. We also note that between the proposed rule and the final rule, we also incorporated BLS revised historical data for MFP from 1987 to 2010, with 2010 being a preliminary value. For FY 2012, the regulations in §§ 412.73(c)(16), 412.75(d), 412.77(e), 412.78(e), and 412.79(d) already contain VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 provisions that set the update factor for SCHs and MDHs equal to the update factor applied to the national standardized amount for all IPPS hospitals. Therefore, as we proposed, we are not making further changes to these five regulatory provisions to reflect the FY 2012 update factor for SCHs and MDHs. 2. FY 2012 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 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act, which states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for fiscal year 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount equals the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25949), we proposed an applicable percentage increase to the Puerto Rico-specific operating standardized amount of 1.5 percent. We did not receive any public comments on this proposal. Therefore, for this final rule, we are finalizing an applicable percentage increase to the Puerto Ricospecific operating standardized amount of 1.9 percent. As we noted above, for the proposed rule, we used IGI’s first quarter 2011 forecast of the FY 2006based IPPS market basket rate-ofincrease. For this final rule, we used the most recent data available, which was IGI’s second quarter 2011 forecast of the FY 2006-based IPPS market basket rateof-increase. Similarly, for the proposed rule, we used IGI’s first quarter 2011 forecast of MFP. For this final rule, we used the most recent data available, which was IGI’s second quarter 2011 PO 00000 Frm 00216 Fmt 4701 Sfmt 4700 forecast of MFP. We also note that between the proposed rule and the final rule, we also incorporated BLS revised historical data for MFP from 1987 to 2010, with 2010 being a preliminary value. For FY 2012, under the authority of section 1886(d)(9)(C)(i) of the Act, as amended by section 401(c) of Public Law 108–173, we proposed to revise the existing regulations at § 412.211(c) to set the update factor for the Puerto Ricospecific operating standardized amount equal to the update factor applied to the national standardized amount for all IPPS hospitals (76 FR 25949). We did not receive any public comments on this proposal. Therefore, in this final rule, we are adopting as final, without modification, the proposed changes to § 412.211(c) to reflect current law. 3. Productivity Adjustment Section 3401(a) of the Affordable Care Act amended section 1886(b)(3)(B) of the Act to require certain adjustments to the ‘‘applicable percentage increase’’ to the operating IPPS. One such change is to require that, in FY 2012 (and in subsequent fiscal years), the applicable percentage increase be annually adjusted by changes in economy-wide productivity. Section 1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the Affordable Care Act, defines this productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10year period ending with the applicable fiscal year, calendar year, cost reporting period, or other annual period) (the ‘‘MFP adjustment’’). The Bureau of Labor Statistics (BLS) is the agency that publishes the official measure of private nonfarm business MFP. We refer readers to the BLS Web site at: https:// www.bls.gov/mfp to obtain the BLS historical published MFP data. The projection of MFP is currently produced by IHS Global Insight, Inc. (IGI), an economic forecasting firm. In order to generate a forecast of MFP, IGI replicated the MFP measure calculated by the BLS using a series of proxy variables derived from its U.S. macroeconomic models. These models take into account a broad range of factors that influence the total U.S. economy. IGI forecasts the underlying proxy components such as Gross Domestic Product (GDP), capital, and labor inputs required to estimate MFP and then combines those projections according to the BLS methodology. In Table IV.K.1 below, we identify each of the major MFP component series E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations employed by the BLS to measure MFP. We also provide the corresponding concepts forecasted by IGI and 51691 determined by IGI and CMS to be the best available proxies for the BLS series. TABLE IV.K.1—MULTIFACTOR PRODUCTIVITY COMPONENT SERIES EMPLOYED BY THE BUREAU OF LABOR STATISTICS AND IHS GLOBAL INSIGHT BLS series IGI series Real value-added output, constant 2005 dollars. Private nonfarm business sector labor input; 2005 = 100.00. mstockstill on DSK4VPTVN1PROD with RULES2 Aggregate capital inputs; 2005 = 100.00. IGI found that the historical growth rates of the BLS components used to calculate MFP and the IGI components identified are consistent across all series and, therefore, suitable proxies for calculating MFP. We have included below a more detailed description of the methodology used by IGI to construct a forecast of MFP, which is aligned closely with the methodology employed by the BLS. For more information regarding the BLS method for estimating productivity, we refer readers to the BLS Web site at: https://www.bls.gov/mfp/ mprtech.pdf. At the time of the development of this FY 2012 final rule, the BLS had published a historical time series of private nonfarm business MFP for 1987 through 2010, with 2010 being a preliminary value. Using this historical MFP series and the IGI forecasted series, the IGI had developed a forecast of MFP for 2011 through 2021, as described below. To create a forecast of BLS’ MFP index, the forecasted annual growth rates of the ‘‘non-housing, nongovernment, nonfarm, real GDP,’’ ‘‘hours of all persons in private nonfarm establishments adjusted for labor composition,’’ and ‘‘real effective capital stock’’ series (ranging from 2011 to 2021) are used to ‘‘grow’’ the levels of the ‘‘real value-added output,’’ ‘‘private nonfarm business sector labor input,’’ and ‘‘aggregate capital inputs’’ series published by the BLS. Projections of the ‘‘hours of all persons’’ measure are calculated using the difference between projections of the BLS index of output per hour and real GDP. This difference is then adjusted to account for changes in labor composition in the forecast interval. Using these three key concepts, MFP is derived by subtracting the contribution of labor and capital inputs from output growth. However, in order to estimate MFP, we need to understand the relative contributions of labor and capital to total output growth. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Non-housing, non-government, nonfarm real GDP, Billions of chained 2005 dollars—annual rate. Hours of all persons in private non-farm establishments, 2005 = 100.00, adjusted for labor composition effects. Real effective capital stock used for full employment GDP, Billions of chained 2005 dollars. Therefore, two additional measures are needed to operationalize the estimation of the IGI MFP projection: Labor compensation and capital income. The sum of labor compensation and capital income represents total income. The BLS calculates labor compensation and capital income (in current dollar terms) to derive the nominal values of labor and capital inputs. IGI uses the ‘‘nongovernment total compensation’’ and ‘‘flow of capital services from the total private nonresidential capital stock’’ series as proxies for the BLS’ income measures. These two proxy measures for income are divided by total income to obtain the shares of labor compensation and capital income to total income. In order to estimate labor’s contribution and capital’s contribution to the growth in total output, the growth rates of the proxy variables for labor and capital inputs are multiplied by their respective shares of total income. These contributions of labor and capital to output growth are subtracted from total output growth to calculate the ‘‘change in the growth rates of multifactor productivity’’: MFP = Total output growth¥((labor input growth * labor compensation share) + (capital input growth * capital income share)) The change in the growth rates (also referred to as the compound growth rates) of the IGI MFP are multiplied by 100 in order to calculate the percent change in growth rates (the percent change in growth rates are published by the BLS for its historical MFP measure). Finally, the growth rates of the IGI MFP are converted to index levels based to 2005 to be consistent with the BLS’ methodology. For benchmarking purposes, the historical growth rates of IGI’s proxy variables were used to estimate a historical measure of MFP, which was compared to the historical MFP estimate published by the BLS. The comparison revealed that the growth rates of the components were consistent across all series and, PO 00000 Frm 00217 Fmt 4701 Sfmt 4700 therefore, validated the use of the proxy variables in generating the IGI MFP projections. The resulting MFP index was then interpolated to a quarterly frequency using the Bassie method for temporal disaggregation. The Bassie technique utilizes an indicator (pattern) series for its calculations. IGI uses the index of output per hour (published by the BLS) as an indicator when interpolating the MFP index. As described in section I. of the Addendum to this final rule, we proposed to determine the IPPS market basket percentage increase for FY 2012, which is used to determine the FY 2012 applicable percentage increase, based on the FY 2006-based IPPS market basket. The FY 2006-based IPPS market basket was finalized and adopted in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43843). Section 3401(a) of the Affordable Care Act amended section 1886(b)(3)(B) of the Act in part by adding a new clause (xi) which requires that, after determining the applicable percentage increase for a fiscal year, ‘‘such percentage increase shall be reduced by the productivity adjustment described in subclause (II)’’ (which we refer to as the ‘‘MFP adjustment’’). Section 1886(b)(3)(B)(i)(XX) of the Act establishes the applicable percentage increase for FY 2007 and each subsequent fiscal year as equal to the rate-of-increase (that is, the percentage increase) in the hospital market basket for IPPS hospitals, 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 and to other statutory adjustments, including the productivity adjustment. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25951), we proposed that the MFP adjustment be subtracted from the FY 2012 operating applicable percentage increase. We proposed that the end of the 10-year moving average of changes in the MFP should coincide with the end of the E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51692 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations appropriate FY update period. Because the applicable percentage increase is reduced by the MFP adjustment, we believed it is appropriate for the numbers associated with both components of the calculation (the underlying market basket percentage increase used to determine the applicable percentage increase and the productivity adjustment) to line up so that changes in market conditions are aligned. Therefore, for the FY 2012 update, the MFP adjustment is calculated as the 10-year moving average of changes in MFP for the period ending September 30, 2012. We proposed to round the final annual adjustment to the one-tenth of one percentage point level up or down as applicable according to conventional rounding rules (that is, if the number we are rounding is followed by 5, 6, 7, 8, or 9, we would round the number up; if the number we are rounding is followed by 0, 1, 2, 3, or 4, we would round the number down). In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, we proposed to base the FY 2012 market basket update used to determine the applicable percentage increase for the IPPS on the first quarter 2011 forecast of the FY 2006-based IPPS market basket, which was estimated to be 2.8 percent. This percentage increase, 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, was then reduced by the proposed MFP adjustment (the 10-year moving average of MFP for the period ending FY 2012) of 1.2 percent, which was calculated as described above and based on IGI’s first quarter 2011 forecast. We also proposed that if more recent data were subsequently available (for example, a more recent estimate of the market basket and MFP adjustment), we would use such data, if appropriate, to determine the FY 2012 market basket update and MFP adjustment in the final rule. Following application of the productivity adjustment, the applicable percentage increase is then reduced by 0.1 percentage point, as required by section 1886(b)(3)(B)(xii) of the Act, as added and amended by sections 3401 and 10319(a) of the Affordable Care Act (as discussed in section I. of the Addendum to this final rule). Comment: One commenter expressed concern about the impact of the proposed productivity adjustment, the Affordable Care Act mandated reduction, and the documentation and coding adjustment. The commenter specifically stated that further VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 reductions cannot be sustained and will continue to deplete scarce resources, making hospitals’ mission of providing high quality care to patients even more challenging. Response: As the commenter acknowledged, the Affordable Care Act requires that a productivity adjustment and a 0.1 percentage point reduction be applied to IPPS provider payment updates for FY 2012. Therefore, CMS is mandated to apply these adjustments to the IPPS hospital payments for FY 2012. We refer readers to section II.D. of this preamble for our responses to public comments on the documentation and coding adjustment. After consideration of the public comments we received and based on a more recent estimate of the market basket and MFP adjustment, we are finalizing our proposed method for calculating and applying the MFP adjustment. In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, we base the FY 2012 market basket update used to determine the applicable percentage increase for the IPPS on IGI’s second quarter 2011 forecast of the FY 2006-based IPPS market basket rate-ofincrease, which is estimated to be 3.0 percent. This percentage increase, 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, is then reduced by the MFP adjustment (the 10year moving average of MFP for the period ending FY 2012) of 1.0 percent, which was calculated as described above and based on IGI’s second quarter 2011 forecast. Following application of the productivity adjustment, the applicable percentage increase is then reduced by 0.1 percentage point, as required by section 1886(b)(3)(B)(xii) of the Act, as added and amended by sections 3401 and 10319(a) of the Affordable Care Act (as discussed in section I. of the Addendum to this final rule). L. Additional Payments to Hospitals With High Percentage of End-Stage Renal Disease (ESRD) Discharges (§ 412.104) Under existing regulations at § 412.104(a), we provide additional Medicare payments to a hospital for inpatient services provided to Medicare beneficiaries with end-stage renal disease (ESRD) who receive dialysis during a hospital stay if the hospital’s ESRD Medicare beneficiary discharges, excluding certain MS–DRGs noted below, where the beneficiary receives dialysis during the inpatient stay, are 10 percent or more of its total Medicare PO 00000 Frm 00218 Fmt 4701 Sfmt 4700 discharges. These additional payments are intended to lessen the impact of the added costs for hospitals that deliver inpatient dialysis services to a high concentration of ESRD Medicare beneficiaries. The regulation provides that discharges classified into MS–DRG 652 (Renal Failure), MS–DRG 682 (Renal Failure with MCC), MS–DRG 683 (Renal Failure with CC), MS–DRG 684 (Renal Failure without CC/MCC), and MS–DRG 685 (Admit for Renal Dialysis) are excluded from the calculation of ESRD Medicare beneficiary discharges for purposes of determining a hospital’s eligibility for these additional payments. We excluded these MS–DRGs because they include payment for the cost of inpatient dialysis treatments. The current Medicare cost reporting instructions in the Provider Reimbursement Manual, Part II (PRM– II), at section 3630.1, require hospitals to enter as the denominator of the calculation on Line 5 ‘‘total Medicare discharges as reported on Worksheet S– 3, Part I,’’ excluding discharges for the dialysis MS–DRGs. As drafted, this instruction includes only discharges for beneficiaries enrolled in original fee-forservice Medicare in the denominator of the calculation. In the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25951), we proposed to clarify that our policy is that the term ‘‘Medicare discharges’’ used in § 412.104(a) refers to discharges of all beneficiaries entitled to Medicare Part A. Discharges associated with individuals entitled to Medicare Part A include discharges of individuals receiving benefits under original Medicare, discharges of individuals whose inpatient benefits are exhausted or whose stay was not covered by Medicare, and discharges for individuals enrolled in Medicare Advantage Plans, cost contracts under section 1876 of the Act (health maintenance organizations (HMOs)) and competitive medical plans (CMPs). Consistent with this proposed clarification, these discharges would be included in the denominator of the calculation for the purpose of determining eligibility for the ESRD additional payment to hospitals. Similarly, for the numerator of this calculation, all discharges of ESRD beneficiaries who are entitled to Medicare Part A and who receive inpatient dialysis, subject to the exclusions of certain discharges classified into MS–DRGs 652, 682, 683, 684, and 685, would be included in the determination of eligibility for the additional payment to hospitals. We also stated that we intended to revise E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations section 3630.1 of the PRM–II to reflect this clarification. Comment: One commenter disagreed with our proposed clarification to include Medicare Advantage discharges in the denominator of the calculation for the purpose of determining eligibility for the ESRD additional payment to hospitals. The commenter believed that CMS is inconsistent in its policies regarding the treatment of Medicare Advantage days and asserted that legally these discharges should not be treated the same as discharges of patients who are enrolled in original Medicare Part A. Response: We do not agree with the assertion of the commenter. Beneficiaries who elect to receive their benefits through Medicare Advantage remain entitled to benefits under Medicare Part A while enrolled in Part C. For example, the hospice benefit is administered under Medicare Part A, regardless of whether an individual has elected to enroll in Part C. Thus, if a beneficiary enrolled in a Medicare Advantage plan elects to receive hospice care, that benefit is administered under the traditional fee-for-service model and not by the beneficiary’s Medicare Advantage plan. If, while receiving hospice care, the beneficiary also needs hospital inpatient care unrelated to the condition that caused the beneficiary to elect hospice care, the cost of that care would still be administered by the beneficiary’s Medicare Advantage plan. As a result, it is possible for a beneficiary enrolled in a Medicare Advantage plan to receive benefits administered under Part A and Part C simultaneously. Beneficiaries enrolled in Medicare Advantage plans are entitled to benefits under Part A, and we believe it is appropriate to include in the denominator all discharges of individuals entitled to Part A, regardless of whether their benefits are administered by a Medicare Advantage plan or by traditional fee-for-service Medicare. Comment: One commenter indicated that including these days in both the numerator and denominator would limit a hospital’s ability to qualify for the additional payment. The commenter disagreed with including the additional discharges in both the numerator and denominator and advocated that the additional discharges should be added to only the numerator. Response: We acknowledge the commenter’s concerns. However, there is no policy or legal rationale to treat these days differently for the purpose of the numerator and denominator of this calculation. We recognize that this may make it somewhat more difficult for some hospitals to qualify for this add- VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 on payment, but note that it may allow some hospitals more opportunity to qualify if a large proportion of their Medicare Advantage patient discharges are for Medicare beneficiaries with ESRD. Comment: Several commenters expressed concern that the instructions in section 3630.1 of the PRM–II currently do not include these days on the Medicare Cost Report Worksheet S– 3. They also believed there are difficulties when identifying those discharges not associated with original Medicare Part A. Response: We intend to revise these instructions to reflect the clarification in this final rule. Comment: One commenter suggested that CMS define more clearly the effective date of the clarification. Response: As explained above, beneficiaries who elect to receive their benefits through Medicare Advantage remain entitled to benefits under Part A and must be included in the computation of ‘‘Medicare discharges’’ for purposes of determining whether a hospital qualifies for additional payments under § 412.104(a). However, the PRM–II instructions currently do not provide for discharges associated with individuals enrolled in Medicare Advantage plans to be included in the calculation. Accordingly, this clarification is needed to ensure that hospitals understand that beneficiaries who have elected to receive their benefits through Medicare Advantage must be included in the ESRD add-on payment calculation. We intend to revise the PRM–II instructions to require that beneficiaries enrolled in MA plans be included in both the numerator and demoninator of this calculation. The revised instructions will be effective for cost reporting periods starting on or after October 1, 2011. After consideration of the public comments we received, we are finalizing our clarification that the term ‘‘Medicare discharges’’ used in § 412.104(a) of the regulations refers to discharges of all beneficiaries entitled to Medicare Part A. Individuals entitled to Medicare Part A include individuals receiving benefits under original Medicare, individuals whose inpatient benefits are exhausted or whose stay was not covered by Medicare, and individuals enrolled in Medicare Advantage Plans, cost contracts under section 1876 of the Act (HMOs), and CMPs. Consistent with this clarification, these discharges, subject to the exclusions of certain discharges classified into MS–DRGs 652, 682, 683, 684, and 685, must be included in the denominator of the calculation for the PO 00000 Frm 00219 Fmt 4701 Sfmt 4700 51693 purpose of determining eligibility for the ESRD additional payment to hospitals. Similarly, for the numerator of this calculation, all discharges of ESRD beneficiaries who are entitled to Medicare Part A and who receive inpatient dialysis, excluding discharges for the dialysis MS–DRGs, must be included in the determination of eligibility for the ESRD additional payment to hospitals. We intend to revise the instructions under section 3630.1 of the PRM–II to reflect this clarification. The revised instructions will apply to cost reporting periods beginning on or after October 1, 2011. M. Changes to the Reporting Requirements for Pension Costs for Medicare Cost-Finding Purposes 1. Background Currently, certain pension costs may be allowable costs under Medicare to the extent such costs 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. 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 payments ‘‘must be based on the reasonable cost of services covered under Medicare and related to the care of beneficiaries.’’ In addition, § 413.9(c)(2) states that ‘‘The provision in Medicare for payment of reasonable cost of services is intended to meet the actual costs.’’ Further, the regulations at 412.9(c)(3) state that ‘‘Reasonable cost includes all necessary and proper expenses incurred in furnishing services * * *.’’ Therefore, in accordance with the statute, the regulations include two 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 have issued instructions in section 2142 of the Provider Reimbursement Manual, Part I (PRM–I) for determining and reporting qualified defined benefit E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51694 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations pension costs on the cost report for Medicare cost-finding purposes. For Medicare wage index purposes, the cost reporting instructions in section 3605.2 of the Provider Reimbursement Manual, Part II (PRM–II) for Worksheet S–3, Part II, Lines 13 through 20, require hospitals to comply with the requirements in section 2142 of the PRM–I. Specifically, section 2142.5 of the PRM–I defines the current period liability for pension cost (that is, the maximum allowable pension cost) based on the actuarial accrued liability, normal cost, and unfunded actuarial liability. Under section 2142.4(A) of PRM–I, these liability measurements are to be computed in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), regardless of whether or not the pension plan is subject to ERISA. Also, section 2142.6(A) of the PRM–I requires the current period liability for pension cost to be funded in order to be allowable. In addition, section 2142.6(C) of the PRM–I allows for funding in excess of the current period liability to be carried forward and recognized in future periods. We note that, on March 28, 2008, CMS published Revision 436, a technical clarification to section 2142 of the PRM–I. Under ERISA, the actuarial accrued liability and normal cost are typically determined on an ongoing plan basis using long-term, best-estimate assumptions. The interest assumption reflects the average rates of return expected over the period during which benefits were payable, taking into account the investment mix of plan assets. Pension costs for plans not subject to ERISA (such as church plans and plans sponsored by public sector employers) also are typically based on the actuarial accrued liability and normal cost using long-term, best estimate assumptions. The Pension Protection Act (PPA) of 2006 (Pub. L. 109–280) amended ERISA. Under the PPA amendments to ERISA, the actuarial accrued liability and normal cost are no longer used as a basis for determining ERISA minimum required or maximum tax deductible contributions. ERISA contribution limits are now based on a ‘‘funding target’’ and ‘‘target normal cost’’ measured on a settlement basis using the current market interest rates for investment grade corporate bonds that match the duration of the benefit payouts. The Internal Revenue Service (IRS) publishes the applicable interest rate tables on a monthly basis. Because pension liabilities are very sensitive to changes in the interest rate used to discount future benefit payouts, pension VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 costs based on the PPA ‘‘funding target’’ and ‘‘target normal cost’’ values are expected to be less stable than those based on the pre-PPA traditional longterm, best-estimate assumptions, which change infrequently. Furthermore, plans not subject to the ERISA requirements, as amended by the PPA, are not likely to use the new ‘‘funding target’’ and ‘‘target normal cost’’ basis for determining pension costs, and ERISA plans are not likely to continue to report costs developed using the actuarial accrued liability and normal cost based on long-term basis, best estimate assumptions. Accordingly, there is no longer a standard actuarial basis used by all plans. In response to the PPA amendments to ERISA, we began a review of the rules for determining pension costs for Medicare cost-finding and wage index purposes. As an interim measure, we issued a Joint Signature Memorandum (JSM) in November 2009 that contained 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). Although these instructions were released for purposes of the wage index, they also serve as interim guidance for Medicare cost-finding purposes. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25951 through 25953), we proposed to revise our policy for determining pension cost for Medicare purposes. As mentioned above, due to the ERISA rules, as amended by the PPA, there is no longer a standard actuarial cost basis used by all types of plans. Therefore, we proposed to no longer rely on actuarial computations to determine the maximum annual cost limitation for Medicare. Instead, the general parameters of our proposal would maintain the current requirement that pension costs must be funded to be reportable, and would require all hospitals to report the actual pension contributions funded during the reporting period, on a cash basis. In addition, under this cash basis approach, we proposed separate methodologies for measuring pension costs for Medicare cost-finding purposes (discussed below under section IV.M.2. of this preamble) and for purposes of updating the wage index (discussed in section III.D.2. of this preamble). It was necessary to have two distinct proposals in order to address the different goals of determining a hospital’s payments and updating the average hourly wage to establish the geographic area wage index. The function of the wage index PO 00000 Frm 00220 Fmt 4701 Sfmt 4700 is to measure relative hospital labor costs across areas. This function is distinct from Medicare payment determinations, where the goal is to measure the actual costs incurred by individual hospitals. These two distinct proposals would require separate updated instructions to section 2142 of the PRM–I for Medicare cost-finding purposes and section 3605.2 of the PRM–II for purposes of the wage index. Below is a detailed discussion of the new methodology for reporting pension costs for Medicare cost-finding purposes. A full discussion of our policy for reporting pension costs under the wage index is discussed in section III.D.2. of this preamble, along with a summary of the public comments we received, our responses, and statements of our final policy. We note that we stated in the proposed rule that we ‘‘would require all hospitals to report the actual pension contributions funded during the reporting period, on a cash basis.’’ Our intent was for ‘‘reporting period’’ to refer to the hospital’s Medicare ‘‘cost reporting period’’ rather than another defined reporting period since for costfinding purposes pension costs are reported on a Medicare cost report basis. Similarly, below in the following discussions, the term ‘‘reporting period’’ refers to a Medicare cost reporting period. The final policy below reflects our commitment to the general principles of the President’s Executive Order released January 18, 2011, entitled ‘‘Improving Regulation and Regulatory Review.’’ 2. Allowable Defined Benefit Pension Plan Cost for Medicare Cost-Finding Purposes As mentioned above, the defined benefit pension plan costs (hereafter referred to as ‘‘pension costs’’) reported for Medicare payment purposes should reflect the actual costs incurred by an individual provider. In the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to retain the policy in the current manual requiring pension costs to be funded in order to be reportable. We believe funding is an appropriate basis because it measures the actual expenditure towards the current period liability for pensions. We also proposed to continue to limit the current period liability for pension costs (that is, maximum annual allowable pension costs). However, we proposed to change the methodology for calculating the limit on the current period liability. We proposed that this methodology would be effective for cost reporting periods beginning on or after October 1, 2011. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Specifically, we proposed a limit on the current period liability equal to 150 percent of the average contributions made during the three consecutive reporting periods out of the five most recent reporting periods which produce the highest average. We believe a threshold of 150 percent is appropriate for the following reasons: First, the proposed threshold should be adequate to allow for typical fluctuations in contributions and for inflation. Second, we believe a threshold is necessary to limit the current period liability in order to ensure that reported pension costs are reasonable and do not reflect excessive or advance funding in any particular year. In addition, the proposed limit would help ensure that pension costs in the current year are reasonable because we expect the limit to capture pension costs which relate exclusively to patient care services furnished in the current cost reporting period. The proposed 150-percent limit was established based on an analysis of historical contribution data submitted by pension plans subject to ERISA and published by the U.S. Department of Labor (DOL). Based on our analysis of the DOL contribution data, we expect that pension costs in excess of the limit will only occur in a small number of cases. We believe the use of readily available historical contribution data to establish the limitation will avoid the complexity of a limitation based on technical actuarial measurements. A limit based on average contributions made during the three consecutive reporting periods out of the five most recent reporting periods which produce the highest average will help to ensure that periods when no contributions (or only minimal contributions) are made will not dramatically reduce the limit in subsequent periods. We believe use of a 5-year look-back period will minimize the administrative burden on providers that would be associated with a longer period. We also believe using the three consecutive reporting periods which produce the highest average contributions will better reflect a typical average pension cost while use of contributions for any three periods, even nonconsecutive periods, could introduce atypical results. Specifically, using the three highest nonconsecutive years of contributions in the 5-year look-back period may overstate the average contribution. However, because excessive contributions tend to reduce future funding requirements, we believe it would be unusual for excessive contributions to occur in three consecutive periods. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 While we proposed a limit, we recognized there may be situations when pension costs in excess of the 150percent limit might be reasonable, such as a funding requirement imposed by a third party, that is, ERISA’s minimum funding requirement, statute or collective bargaining agreement. Therefore, we proposed to allow hospitals with contributions in excess of the proposed limit to submit documentation demonstrating that all or a portion of the ‘‘excess’’ costs are reasonable and necessary for a particular cost reporting period. In addition, we believe that providers’ pension costs in excess of the 150percent limit that are not considered reasonable for the current cost reporting period are likely to be prefunded pension costs attributable to the patient care services for a future cost reporting period. Therefore, similar to the current instruction in section 2142.6(C) of the PRM–I, we proposed to continue to use a carry forward policy. Specifically, we proposed that current period contributions in excess of the 150percent limit that are not considered reasonable for the current cost reporting period under the proposed review process be carried forward and reported in future period(s) as the applicable limit for the future period(s) will allow. In the proposed rule we inadvertently stated that ‘‘Medicare contractors’’ would be required to maintain historical data in order to determine the 150percent limit and track any carry forward amounts. However, we intended to write that ‘‘providers’’ would be required to maintain historical data in order to determine the 150percent limit and track any carry forward amounts. We also indicated that we anticipate making a worksheet available for this purpose. We solicited public comments as to documentation or criteria that would be appropriate to make a determination as to whether excess costs are reasonable and necessary. We also invited public comments on the proposal and indicated special interest in receiving public comments related to our proposal to limit the reportable pension amount. Comment: A number of commenters suggested CMS convene a Medicare Technical Advisory Group (MTAG) before establishing a policy on pension costs. Response: An MTAG is not required by statute. Engaging in notice and comment rulemaking provides sufficient process for developing a policy on this issue. In addition, the actuarial terminology used in section 2142 of PRM–I is no longer used under ERISA as amended by the PPA. Accordingly, PO 00000 Frm 00221 Fmt 4701 Sfmt 4700 51695 we believe it is important to address the pension cost issue as expeditiously as possible. Comment: Many commenters supporting an MTAG also stated that an MTAG might recommend adoption of Generally Accepted Accounting Principles (GAAP) (with no funding limit) for the wage index, leading CMS to also adopt GAAP as the basis for costfinding purposes, provided those costs are funded either during the cost reporting period or within 12 months after the end of the cost reporting period. Commenters also suggested that CMS consider any needed modifiers (to GAAP) for either underfunded or overfunded plans. One commenter noted that a proposal to base pension expense for both the wage index and for cost-finding purposes on a 3-year average of actual funding is inconsistent with the other principles of the cost report relying on GAAP and accrual versus cash-basis accounting. The commenters stated that pension funding should be treated the same as the liquidation of liabilities, to be paid within 1 year after the end of the cost reporting period, or with approval of an exception, within 3 years. Response: Pension costs determined in accordance with GAAP (as promulgated by the Financial Accounting Standards Board) are somewhat unique compared to other types of costs under GAAP because pension costs under GAAP are not dependent on the amount funded. Therefore, in order to ensure that this policy is consistent with CMS policy that costs must be funded in order to be reportable, it was necessary to diverge from GAAP principles in this instance. Furthermore, since GAAP with a funding requirement for Medicare costfinding purposes would require the GAAP pension expense to be modified to account for any prepaid costs (overfunding) or accrued costs (underfunding), we believe this would create unnecessary complexity. Under the new policy, pension costs are based on the amount funded during the cost reporting period plus any carry forward amounts, subject to the 150percent limitation. A provision to allow recognition of funding which occurs within 1 year after the end of the reporting period (or 3 years with approval) could result in confusion as to which period funding should be attributed. The period during which funding will be measured (and upon which costs determined) must be clearly and consistently defined. We do not believe that pension costs determined under the new policy will be materially different from those that E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51696 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations would result under GAAP with a funding requirement because in either case, pension costs would be limited to the amount funded (including any carry forward contributions). Furthermore, we believe our policy offers more flexibility for providers to establish and follow a funding strategy that meets their organizational objectives. Comment: A number of commenters supported the proposed limit on the current period liability equal to 150percent of the average contributions made during the three consecutive cost reporting periods out of the five most recent cost reporting periods that produce the highest average. They particularly appreciated the additional provision allowing a hospital with pension contributions in excess of the proposed limit to submit documentation demonstrating that all or a portion of the ‘‘excess’’ costs are reasonable and necessary for a specific cost reporting period. Response: We appreciate the commmenters’ support of our proposal. We recognize there may be situations when pension costs in excess of the 150percent limit are reasonable and necessary and should be reportable as a current period cost. Therefore, as proposed, this final policy will allow a provider to submit documentation to show that ‘‘excess’’ contributions are reasonable and necessary and should be recognized as current period costs. Comment: One commenter asked CMS to clarify how the limit would be determined if there was a plan or corporate merger, if a provider adopted a new plan or increased benefits under an existing plan, or became a new Medicare provider. The commenter expressed concern that, although the limit would be easy to administer, it would ignore real costs in these situations. Response: In a merger situation (either a plan merger or corporate merger), the contribution history should include all contributions made by a provider to a defined benefit plan (either a predecessor plan or the current plan) during the 5-year look-back period. Under a systemwide (multipleemployer) pension plan, the contribution history for each participating provider should reflect only the plan contributions attributed to that provider. For a provider who is new to the Medicare program, the contribution history used to determine the limit should include all pension contributions made during the 5-year look-back period (which is used to develop the 3 year average), including periods, before the provider was part of the Medicare program. In the case of a VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 newly adopted plan, the 5-year lookback period and/or the 3-year averaging period will be limited to the number of cost reporting periods the provider sponsored a defined benefit pension plan. In the case of a benefit improvement, we believe the 150percent limit (which includes a 50percent margin for cost increases) will be adequate since the cost of benefit improvements is typically spread over a period of years. In any of these situations, a provider may submit documentation to show that contributions in excess of the 150 percent limit are reasonable and necessary and should be allowable as a current period cost. Comment: One commenter asked for clarification as to which cost reporting periods will be used to determine the limit on allowable pension costs. Specifically, the commenter asked if CMS will base the limit on the hospital’s five most recent settled cost reports or as-filed cost reports. Another commenter asked what timeframe constitutes ‘‘recent’’ cost reporting periods. Response: The historical contribution data required to compute the limit are not currently reflected on the cost reports. Therefore, settled or as-filed cost reports are not used for the calculation. (We are exploring ways to modify the cost report to show the actual contributions made in each cost reporting period as well as the pension cost for the current period after application of the 150-percent limit.) Instead, the 150-percent limit will be based on the actual pension plan contributions made by a provider as shown on statements provided by the pension plan trustee or insurance carrier, or as reflected on Schedule B or SB of IRS Form 5500. In the case of a systemwide (multiple employer) pension plan, the home office will need to identify the contributions attributed to each participating provider. The limit will be based on the average contributions for the three highest consecutive cost reporting periods out of the five most recent cost reporting periods ending with the current cost reporting period. Comment: One commenter asked whether the hospital would be required to submit documentation regarding its pension contributions in excess of the limit to the Medicare contractor or to CMS. The commenter also inquired as to how the reasonableness and necessity of the excess contribution will be determined and how the determination of reasonableness will be reported to the provider. PO 00000 Frm 00222 Fmt 4701 Sfmt 4700 Response: We have not yet finalized the specific procedure to be used when requesting approval of excess contributions. Further details will be provided as soon as possible, after publication of this final rule. Each request will be reviewed on a facts and circumstances basis. We are not setting forth specific criteria for determining whether a pension cost is reasonable and necessary for the current reporting period because that may prevent us from responding to circumstances that we may not have anticipated and recognizing costs that are reasonable for the current period. However, examples of when approval will be likely be granted include excess contributions required to satisfy a funding requirement imposed by law or under a collective bargaining agreement, or to avoid ERISA funding restrictions. Comment: There were a number of technical questions and requests for clarification on specific aspects of the proposed policy. One commenter requested that CMS clarify whether allowable pension costs for cost-finding will be based on cash contributions, subject to the 150 percent limit, regardless of whether the pension plan shows a current period liability under ERISA or another method. Another commenter observed ‘‘the funding limit is based on 150 percent of three consecutive cost reporting periods out of recent reporting with the highest average and noted that this is similar in nature to the GME/IME three year rolling average in its complexities.’’ This commenter asked if the data would be actual contributions from prior years, or would it be the contributions that were limited by a previous 150-percent limit. Response: Under the revised policy, pension contributions up to the 150percent limit will not be subject to actuarial requirements under ERISA, GAAP or otherwise. However, a provider with costs in excess of the limit will have the option to submit actuarial data to demonstrate that those costs are reasonable and necessary for the current cost reporting period and should therefore be included as current period pension costs. The historical contributions used to determine the 150-percent limit would be the actual cash contributions made by the provider to the pension plan, without regard to the 150-percent limit applicable to any prior period. The following example is provided to show the calculation of the FY 2012 pension cost for a provider with a September 30 fiscal year (FY) cost reporting end date: E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations • Contributions made in the five most recent cost reporting periods: • October 1, 2011—September 30, 2012: $2,000,000 • October 1, 2010—September 30, 2011: 5,000,000 • October 1, 2009—September 30, 2010: 4,000,000 • October 1, 2008—September 30, 2009: 5,000,000 • October 1, 2007–September 30, 2008: 6,000,000 • October 1, 2011 Carry Forward Balance: $1,000,000 The 150-percent limit for FY 2012 will be based on contributions for FYs 2008 through 2010 because these represent the highest three consecutive years of contributions out of the 5 most recent years. The average contribution for those 3 highest consecutive years is ($4,000,000 + $5,000,000 + $6,000,000)/ 3 = $5,000,000. The limit equals $7,500,000 (150 percent of $5,000,000). The provider’s cash funding in the current cost reporting period (FY 2012) is $2,000,000 (none of which was reported as a pension cost in a prior period). The provider has also documented a carry forward balance of $1,000,000, which represents the cash basis contributions made prior to the effective date of the new policy which were not recognized as costs in a prior cost reporting period. For FY 2012, the provider may claim the full $3,000,000 ($2,000,000 in current period contributions plus $1,000,000 in carry forward contributions) because the amount does not exceed the $7,500,000 limit. If the provider’s carry forward balance had been $8,000,000, only $7,500,000 would be reportable as a current period cost due to the 150 percent limit. In that case, the remaining $2,500,000 ($2,000,000 current period contributions + $8,000,000 carry forward balance ¥$7,500,000 current period 150 percent limit) should be reflected as a carry forward balance for the following year. Comment: One commenter asked if current period pension expense would be calculated similar to previous years and would still be subject to the liquidation of liability requirements (that is, funded within 1 year of accrual). The same commenter speculated that there may be confusion on how to determine the allowable pension expense, given the various terms used between GAAP, PRM, IRS, and ERISA. The commenter asked for examples of how to compute allowable pension expense and to provide a crosswalk or revise the terms from the CMS manuals to GAAP and/or IRS terminology. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Response: Generally, Pension costs for cost-finding purposes will no longer be based on actuarially determined measurements. We are aware that there may be confusion due to differences in actuarial terminology and cost methodology applicable for various purposes. This is a key reason why we are no longer requiring actuarial cost measurements to determine pension costs. Accordingly, no crosswalk is needed to reconcile differences in terminology. Furthermore, under the new policy, pension costs will be determined on a cash basis rather than an accrual basis. Funding which occurs after the end of a cost reporting period will be considered as a pension funding for the subsequent cost reporting period, subject to the 150-percent limit in that year. Under the new policy, the liquidation of liability provision will no longer apply. However, the liquidation of liability provision would still be in effect for the cost reporting period immediately prior to the effective date of this new policy. An example of the calculation of the allowable pension cost under the new policy was included in our response to a previous comment. Comment: One commenter recommended that there should be specific statements in the cost report that pension costs for cost-finding will be treated differently from pension costs for the wage index. The commenter also suggested separate PRM cost reporting instructions for the Medicare cost report versus the Medicare wage index, given that there will be separate methodologies for determining pension costs. Response: We are implementing different pension cost policies for wage index and cost-finding purposes. Accordingly, the PRM will be revised to include separate and distinct pension cost provisions for wage index and cost finding purposes. We would like to thank the provider community for their public comments regarding our proposed policy for reporting pension costs for Medicare cost-finding purposes. After considering their concerns and suggestions, we are finalizing our proposal for reporting pension costs for Medicare cost-finding purposes for the reasons set forth in the proposed rule (76 FR 25951 through 25953) and as explained in this final rule. This new policy is effective for cost reporting periods beginning on and after October 1, 2011. Under this final policy, a provider’s pension cost for cost-finding purposes will equal the cash basis contribution deposits (made within the current cost reporting period and not reflected as a pension cost for a prior cost reporting PO 00000 Frm 00223 Fmt 4701 Sfmt 4700 51697 period) plus any carry forward contributions, subject to a limitation. The limitation is equal to 150 percent of the average pension contributions made by the provider during the highest 3 consecutive cost reporting periods out of the 5 most recent cost reporting periods (ending with the current cost reporting period). In the case of a newly adopted plan, the 5-year look-back period and/or the 3-year averaging period will be limited to the number of cost reporting periods the provider sponsored a qualified defined benefit pension plan. This final policy allows a provider with current period contributions and carry forward contributions in excess of the 150-percent limit to submit documentation to show that all or a portion of the excess contributions are reasonable and necessary and should therefore be reportable as current period pension costs. Pension contributions in excess of the reportable amount can be carried forward and reported in a subsequent cost reporting period, subject to the 150-percent limitation. As of the effective date of this new policy, providers should establish a carry forward balance to account for any contributions made prior to the effective date of the new policy (on a cash basis) that were not reflected as pension costs in a prior period. The carry forward balance must then be updated annually to reflect any increases (current period contributions in excess of the reportable amount) or decreases (carry forward balances which are recognized as a current period pension cost). The provider must ensure that there is no duplication of recognized contributions in accounting for carry forward contributions. In addition, providers must document, and maintain for audit, the data used to establish the carry forward balance and any subsequent updates. Under this revised policy, contributions are to be determined on a cash basis. Section 2305 of the PRM–I (liquidation of liabilities provision) will be amended, effective for cost reporting periods subject to this new policy, to exclude qualified defined benefit pension plan costs. The liquidation of liabilities provision will continue to apply to contributions made to liquidate pension costs for cost reporting periods prior to the effective date of this revised policy. We plan to make future amendments to conform existing regulations and PRM–I provisions with this final policy. E:\FR\FM\18AUR2.SGM 18AUR2 51698 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 N. Rural Community Hospital Demonstration Program 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 program pays rural community hospitals for such services under a cost-based 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; • 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 paragraphs (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 program: 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 program in May 2004; 13 hospitals began participation with cost reporting years beginning on or after October 1, 2004. In 2005, 4 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 additional hospitals began under the demonstration program payment methodology with the hospital’s first cost reporting period starting on or after July 1, 2008. At that time, there were 13 hospitals participating in the demonstration program. Five hospitals (3 of the hospitals were among the 13 hospitals that were original participants in the demonstration program and 2 of the hospitals were among the 4 hospitals that began the demonstration program in 2008) withdrew from the demonstration program during CYs 2009 and 2010. (Three of these hospitals indicated that they would be paid more for Medicare inpatient services under the rebasing option allowed under the SCH methodology provided for under section 122 of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110–275). One hospital restructured to become a CAH, and one hospital closed.) So far in CY 2011 one hospital has withdrawn from the demonstration, saying that a large number of managed care patients has made the demonstration methodology unfavorable. These actions left 7 of the pre-expansion participating hospitals (that is, hospitals that were selected to participate in either 2004 or 2008), participating in the demonstration program as of June 1, 2011. 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 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 PO 00000 Frm 00224 Fmt 4701 Sfmt 4700 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 seven IPPS final regulations, spanning the period for which the demonstration program 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, FY 2010, FY 2011 IPPS final rules (69 FR 49183; 70 FR 47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 74 FR 43922, and 75 FR 50343 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 are finalizing a methodology to calculate a budget neutrality adjustment factor to the FY 2012 national IPPS rates. 2. Changes to the Demonstration Program Made by the Affordable Care Act Sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111–148) 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 Pub. L. 108–173, as added by section 3123(a) of the Affordable Care Act and further amended by section 10313 of that Act). Further, the E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 5year 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 Pub. L. 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 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 Pub. L. 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 5-year period. The Affordable Care Act also allows not more than 30 rural community hospitals in such States to participate in the demonstration program during the 5year extension period (section 410A(g)(3) of Pub. L. 108–173, as added by section 3123(a) of the Affordable Care Act and as further amended by section 10313 of such Act). Additionally, we note that we indicated in the FY 2011 IPPS final rule (75 FR 50343) that 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 that 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. We want to clarify that we believe that 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, provides this with respect to a rural community hospital that is participating in the demonstration program under section 410A as of the last day of the initial 5-year period. Specifically, the Affordable Care Act requires that in the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 case of a rural community hospital that is participating in the demonstration as of the last day of the initial 5-year period, the Secretary in calculating payments under subsection (b) shall substitute under paragraph (1)(A) the phrase ‘‘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’’ for the phrase ‘‘the reasonable costs of providing such services for discharges occurring in the first cost reporting period beginning on or after the implementation of the demonstration.’’ The phrase ‘‘the reasonable costs of providing such services for discharges occurring in the first cost reporting period beginning on or after the implementation of the demonstration’’ does not precisely track the language in section 410A(b)(1)(A) of Public Law 108–173. Therefore, we cannot delete and replace it as described in the Affordable Care Act. However, we believe the language of section 410A(g)(4)(B)(i) of Public Law 108–173, as amended, is clear. Namely, a rural community hospital that is participating in the demonstration as of the last day of the initial 5-year period shall be paid for its covered inpatient hospital services ‘‘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.’’ (This methodology does not apply to services furnished in a psychiatric or rehabilitation unit of the hospital which is a distinct part.) For discharges occurring in a subsequent cost reporting period during the demonstration, the formula in section 410A(b)(1)(B) of Public Law 108–173, as amended, would apply to such hospitals. That is, the payment will be the lesser of reasonable cost or the target amount. We calculate the target amount in the second cost reporting period by taking the reasonable costs of providing covered inpatient hospital services in the first cost reporting period beginning on or after the first day of the 5-year extension and increasing it by the IPPS market basket percentage increase (as defined in section 1886(b)(3)(B)(iii) of the Act) for that particular cost reporting period. We calculate the target amount in subsequent cost reporting periods by taking the preceding cost reporting period’s target amount and increasing it by the IPPS market basket percentage increase (as defined in section 1886(b)(3)(B)(iii) of the Act) for that particular cost reporting period. (We note that, in calculating target amounts, PO 00000 Frm 00225 Fmt 4701 Sfmt 4700 51699 we utilize the IPPS market basket percentage increase as defined in section 1886(b)(3)(B)(iii) of the Act, as opposed to the applicable percentage increase as defined in section 1886(b)(3)(B)(i) of the Act. We note that section 410A(b)(2)(B) of Public Law 108–173, in pertinent part, provides that target amounts are ‘‘increased by the applicable percentage increase (under clause (i) of section 1886(b)(3)(B) of the Social Security Act * * *) in the market basket percentage increase (as defined in clause (iii) of such section) for that particular cost reporting period.’’ The phrase ‘‘applicable percentage increase (under clause (i) of section 1886(b)(3)(B) of the Social Security Act * * *) in the market basket percentage increase * * *’’ is ambiguous, as there is no applicable percentage increase in the market basket percentage increase. Because the focus of the provision is the amount of the IPPS market basket percentage increase, we believe the provision is addressing the IPPS market basket percentage increase, and not the applicable percentage increase, which includes other adjustments to the market basket percentage increase. Further, because section 410A(b)(2)(B) of Public Law 108–173 is addressing target amounts under the demonstration, we believed it was logical to read the statute as providing for an update structure mimicking the update structure for target amounts of reasonable cost-based providers like children’s and cancer hospitals, as well as RNCHIs. This rationale applies any time we use the IPPS market basket percentage increase to update target amounts in the demonstration. With respect to hospitals that are newly joining the demonstration, they are paid the reasonable costs of providing covered inpatient hospital services, other than services furnished in a psychiatric or rehabilitation unit of the hospital which is a distinct part, for discharges occurring in the hospital’s first cost reporting period beginning on or after the implementation of the demonstration program (section 410A(b)(1)(A) of Public Law 108–173). We have determined that each of these new hospitals will begin participating in the demonstration with its first cost reporting period beginning on or after April 1, 2011. We chose this date because it follows immediately upon the notification of the hospitals of their acceptance to the demonstration and it will allow the hospitals to begin participation in the demonstration as soon as possible. With respect to rural community hospitals newly joining the demonstration, for discharges occurring E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51700 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations in a subsequent cost reporting period under the demonstration program, the formula in section 410A(b)(1)(B) of Public Law 108–173, as amended, would apply. That is, payments will be the lesser amount of reasonable costs or the target amount. We calculate the target amount in the second cost reporting period by taking the reasonable costs of providing covered inpatient hospital services in the first cost reporting period and increasing it by the IPPS market basket percentage increase for that particular cost reporting period. We calculate the target amount in subsequent cost reporting periods by taking the preceding cost reporting period’s target amount and increasing it by the IPPS market basket percentage increase for that particular cost reporting period. 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 that Act. We published a solicitation for applications for additional participants in the Rural Community Hospital Demonstration Program in the Federal Register on August 30, 2010 (75 FR 52960). Applications were due on October 14, 2010. The 20 States with the lowest population density, which are eligible for the demonstration program are: Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, and Wyoming (Source: U.S. Census Bureau, Statistical Abstract of the United States: 2003). We approved 19 new hospitals for participation in the demonstration program. We reported in the proposed rule that we were waiting for these hospitals to respond as to whether they accept the terms and conditions stipulated for their participation in the demonstration; and, therefore, we based cost estimates for the demonstration for this new set of hospitals based on the assumption that all 19 hospitals would elect to participate. We proposed that if fewer were actually to make this election, we would accordingly adjust the demonstration cost estimates in this final rule. At the end of the response period, 18 of the 19 selected hospitals accepted the terms of conditions of the demonstration and agreed to participate; one hospital declined participation. Therefore, we are basing the cost estimates for this final rule on the assumption that 18 of these newly participating hospitals will participate in the demonstration during FY 2012. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 3. FY 2012 Budget Neutrality Adjustment In order to ensure that the demonstration is budget neutral as is required by the statute, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25955 through 25960), we proposed to adjust the national IPPS rates to account for any added costs attributable to the demonstration program. Specifically, we proposed that the budget neutrality adjustment would account for: (1) The estimated costs of the demonstration program in FY 2012 for the 8 currently participating hospitals (‘‘pre-expansion participating hospitals’’); (2) the estimated costs of the demonstration in FY 2012 for the 19 hospitals newly selected to begin participation in the demonstration program; and (3) the amount by which the costs of the demonstration program, as indicated by settled cost reports for cost reporting periods beginning in FYs 2007 and 2008 for hospitals participating in the demonstration program during FYs 2007 and 2008, exceeded the amount that was identified in the FY 2007 and FY 2008 IPPS final rules as the budget neutrality offsets for FYs 2007 and 2008. We are finalizing our proposed methodology except where specified below. We note that we proposed that if updated data became available for the final rule, we would use them to estimate the costs of the demonstration program in FY 2012. For this final rule, we have updated data which resulted in various components of the methodology being updated. We explain in more detail below in sections IV.N.3. a. and b. the specific changes. a. Component of the FY 2012 Budget Neutrality Adjustment That Accounts for Estimated FY 2012 Demonstration Program Costs of the ‘‘Pre-Expansion Participating Hospitals’’ In the proposed rule, we noted that eight hospitals that were selected for participation in either 2004 or 2008 are currently continuing to participate in the extension period mandated by the Affordable Care Act. (We refer to these hospitals as ‘‘pre-expansion participating hospitals’’ in this preamble discussion of the rural community hospital demonstration program.) (In the proposed rule, we said that hospitals were selected in 2005; this was a mistake. Hospitals were selected for the demonstration only in 2004 and in 2008.) In the proposed rule, the component of the FY 2012 budget neutrality adjustment to the national IPPS rates that accounts for the estimated demonstration program costs in FY 2012 for the eight ‘‘pre-expansion PO 00000 Frm 00226 Fmt 4701 Sfmt 4700 participating hospitals’’ was calculated by utilizing three separate methodologies: one methodology for the six hospitals that had participated in the demonstration program since its inception and that we indicated were continuing to participate in the demonstration program (‘‘originally participating hospitals’’); a second methodology for one hospital that is currently participating in the demonstration program and that was among the four hospitals that joined the demonstration program in 2008; and a third methodology for the other hospital that is currently participating in the demonstration program that was among the four hospitals that joined the demonstration program in 2008. Different methods were used for these three sets of hospitals because the data available to us to estimate the demonstration program costs for each was different. We are finalizing the above methodology, except as explained previously, certain aspects of the methodology have been updated in this final rule based on updated data. We also note that the number of hospitals that were selected for participation in either 2004 or 2008 and that are currently continuing to participate in the extension period decreased by one for this final rule since one of the ‘‘originally participating’’ hospitals left the demonstration. In order to account for this decrease, we adjusted the methodology described above and explained in detail below by reducing the number of pre-expansion participating hospitals used in the calculation from eight to seven and reducing the number of originally participating hospitals used in the calculation from six to five. We have updated cost report data available for this final rule, consistent with our proposal to use updated data in the final rule to the extent they are available. Specifically, in the following description, we are identifying for one of the pre-expansion participating hospitals that there is a more recently finalized cost report available (as compared to the ‘‘as submitted cost report’’ used in the proposed rule). We are updating various components of the payment methodology to reflect the newly available finalized cost report for this hospital. In the following description, we are identifying which cost reports are the same as those identified in the proposed rule, and we also identify the one that has changed. (1) Consistent with the proposed rule, and for this final rule, for the five (six in the proposed rule) ‘‘originally participating hospitals,’’ that is, E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations hospitals that have participated in the project since its inception and that are continuing to participate, the estimate of the portion of the budget neutrality adjustment that accounts for the estimated FY 2012 demonstration program costs is based on data from their settled cost reports applicable to the second year of the demonstration— that is, for cost reporting periods ending in FY 2007. We are using these cost reports because they are the most recent finalized cost reports and, thus, we believe their accounting of costs is the most accurate indicator available to us at this time to estimate FY 2012 demonstration costs. (2) For one of the two hospitals that joined the demonstration program in 2008, and that is still participating, we proposed to estimate the FY 2012 demonstration program costs under section 410A of Public Law 108–173 as amended based on data from its as submitted cost report beginning January 1, 2008. For this final rule, because we have received a finalized cost report for the cost report period beginning January 1, 2009, we are using updated cost report data for this hospital. (3) The remaining hospital of the seven (eight in the proposed rule) ‘‘preexpansion participating hospitals’’ which began participation in FY 2008 is an Indian Health Service provider. Historically, the hospital has not filed standard Medicare cost reports. Under the proposed rule, and for this final rule, we used its full ‘‘as submitted’’ cost report filed for the period beginning October 1, 2008 to estimate its FY 2012 costs. We used this ‘‘as submitted’’ cost report because as the most recent cost report we believe it allows us to estimate FY 2012 costs accurately. As we proposed, for this final rule, we are using the same general methodology used for the FY 2011 IPPS/LTCH PPS final rule, but providing more detail. The methodology for calculating the estimated FY 2012 demonstration cost for the seven (eight in the proposed rule) ‘‘pre-expansion participating hospitals’’ is as follows: Step 1: As proposed, in this final rule, in order to calculate demonstration costs for each of the five (six in the proposed rule) ‘‘originally participating hospitals’’ for the cost reporting period ending in FY 2007, we subtracted the amount it would have otherwise been paid under the applicable payment system(s) for covered inpatient hospital services without the demonstration during such period (as indicated on the settled cost report for this period) from the amount paid to it for such services under the reasonable cost methodology in section 410A(b) of Public Law 108– VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 173 (as indicated on the settled cost report for this period). Steps 1(a) through (c) below are performed to calculate FY 2007 demonstration costs for these five hospitals. (As proposed, for this final rule, we are using final settled cost reports ending in FY 2007 to represent FY 2007 demonstration costs for each of these hospitals because a substantial portion of the months included within these cost report years (respective to each hospital) fall within FY 2007, and, therefore we believe that for purposes of this analysis it is appropriate to consider data from these cost reports to represent FY 2007 inpatient costs for the demonstration during that period.) In addition, we note that throughout the remainder of the preamble discussion on the budget neutrality adjustment for the rural community hospital demonstration we refer to ‘‘covered inpatient hospital services’’ as that term is defined in section 410A(f)(2) of Public Law 108– 173 as amended as ‘‘inpatient hospital services.’’ We also note that the phrase ‘‘the reasonable cost methodology’’ means the reasonable cost methodology in section 410A(b) of Public Law 108– 173 or the reasonable cost methodology in section 410A(b) of Public Law 108– 173, as amended, as applicable in the particular situation. • Step 1(a): As proposed, for this final rule, first, for each hospital, we subtracted the amount that would otherwise be paid under the IPPS for the hospital’s inpatient hospital services (excluding those associated with swing beds) for the cost reporting period ending in FY 2007 (as indicated on the settled cost report for this period) from the amount paid for such services under the reasonable cost methodology (as indicated on the settled cost report for this period). The result of this difference is each hospital’s demonstration costs for its inpatient hospital services (excluding those associated with swing beds) for the cost reporting period ending in FY 2007. (We used the amount the hospital would otherwise be paid under the IPPS as indicated above because this is the payment methodology under which the hospital’s beds (excluding swing beds) would be paid in the absence of the demonstration. This rationale applies throughout the preamble discussion on the rural community hospital demonstration budget neutrality adjustment whenever this is a component of the methodology.) • Step 1(b): As proposed, for this final rule, next, with respect to the hospitals that have swing beds, we subtracted the amount the hospital would otherwise be paid under section 1888(e)(7) of the Act PO 00000 Frm 00227 Fmt 4701 Sfmt 4700 51701 for the inpatient hospital services associated with the swing beds for the cost reporting period ending in FY 2007 (as indicated in the settled cost report for this period) from the amount paid for such services under the reasonable cost methodology (as indicated in the settled cost report for such period). The result of this difference is each hospital’s demonstration costs associated with its swing beds for the cost reporting period ending in FY 2007. (We used the amount the hospital would otherwise be paid under section 1888(e)(7) of the Act as indicated above because this is the payment methodology under which the hospital’s swing beds would be paid in the absence of the demonstration. This rationale applies throughout the preamble discussion on the rural community hospital demonstration budget neutrality adjustment whenever this is a component of the proposed methodology.) • Step 1(c): Next, under the proposed rule, in order to calculate total estimated FY 2010 demonstration costs for all six (five in this final rule) hospitals, we added together the differences calculated above in Step 1(a) and Step 1(b) as applicable for each of the six hospitals and then multiplied this sum by the IPPS market basket percentage increases for FYs 2008 through 2010, which were adopted in the respective IPPS final rules and a 2-percent annual volume adjustment for the years 2008 through 2010. We note that, for this final rule, for purposes of Step 1(c), in order to calculate total estimated FY 2010 demonstration costs for all five hospitals, we added together the differences calculated above in Step 1(a) and Step 1(b) as applicable for each of the five hospitals and then multiplied this sum by the IPPS market basket percentage increases for FYs 2008 through 2010, which were adopted in the respective IPPS final rules and a 3percent annual volume adjustment for the years 2008 through 2010. For this final rule, we are using a 3-percent volume adjustment. In the proposed rule, we proposed to include a volume adjustment in the methodology for calculating demonstration costs recognizing that the volume of services provided in small rural hospitals tend to fluctuate. In this final rule, we have revised the volume adjustment from the 2-percent amount stated in the proposed rule, which was based on an assessment at the inception of the demonstration as to the growth in volume of services, to 3 percent based on updated data. Three percent per year is the current estimate nationwide as to the rate of increase in E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51702 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations the number of Medicare fee-for-service discharges. As we proposed, for this final rule, we are applying the applicable IPPS market basket percentage increases described above to model estimated FY 2010 demonstration costs because we believe that this update factor appropriately indicates the trend of increase in hospital operating costs. Further, this approach is consistent with the agency’s use of the IPPS market basket percentage increase to update the rateof-increase limits (which is a reasonable cost-based methodology) for children’s and cancer hospitals as well as RNCHIs. Therefore, we believe it enables us to estimate appropriately demonstration costs that are tied to a reasonable costbased methodology. Also, this approach is consistent with how we update target amounts under the demonstration under section 410A(b)(2)(B) of Public Law 108–173. We note that the rationale provided herein for utilizing an IPPS market basket percentage increase and a 3-percent annual volume adjustment to estimate demonstration costs is applicable throughout the preamble discussion on the rural community hospital budget neutrality adjustment whenever these factors are used to model the trend of increase and volume increases in the budget neutrality adjustment methodology finalized in this final rule. As a side note, as a special feature of the demonstration, we added a supplemental worksheet to the standard hospital cost report which is completed by the fiscal intermediary in the final settlement for these five ‘‘originally participating hospitals.’’ This supplemental worksheet includes the calculation of the hospital’s first year reasonable costs of inpatient hospital services (excluding those associated with swing beds) as set forth in section 410A of Public Law 108–173, and, in addition, for the hospital’s second year cost reports (those cost reports ending in FY 2007), the target amount (that is, the previous year’s Medicare reasonable cost amount for inpatient hospital services updated by the IPPS market basket percentage increase as provided in section 410A(b)(2)(B) of Pub. L. 108– 173). (This supplemental worksheet also includes a calculation of the amount that would otherwise be paid for the hospital’s inpatient hospital services under the IPPS, as is ordinarily presented on the standard hospital cost report. For hospitals that have swing beds, this supplemental worksheet also includes the following: the estimated amount the hospital would otherwise be paid under section 1888(e)(7) of the Act for the inpatient hospital services VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 associated with the hospital’s swing beds; the estimated amount the hospital would be paid under the reasonable cost methodology for the inpatient hospital services provided in its swing beds, and the hospital’s target amount for its swing beds. Step 2: In the proposed rule, in order to calculate estimated FY 2008 demonstration costs for the non-Indian Health Service hospital that began the demonstration program in 2008, we subtracted the estimated amount it would have otherwise been paid for inpatient hospital services without the demonstration under the applicable payment system(s) (as indicated on its ‘‘as submitted’’ cost report beginning January 1, 2008) from the estimated costs of such services under the reasonable cost methodology (as indicated on the ‘‘as submitted’’ cost report for this period). We proposed that Steps 2(a) through (c) below would be performed to calculate this amount. Step 2(a): Specifically, we subtracted the estimated amount that would otherwise be paid under the IPPS for the hospital’s inpatient hospital services (excluding swing beds) for the cost reporting period beginning January 1, 2008 (as indicated on the ‘‘as submitted’’ cost report) from the estimated amount to be paid for such services under the reasonable cost methodology (as indicated on the ‘‘as submitted’’ cost report for such period). • Step 2(b): Next, we subtracted the estimated amount that would otherwise be paid under section 1888(e)(7) of the Act for the inpatient hospital services associated with the swing beds during the cost reporting period beginning January 1, 2008 (as indicated on the ‘‘as submitted’’ cost report) from the estimated amount to be paid for such services under the reasonable cost methodology as indicated on the ‘‘as submitted’’ cost report for such period. • Step 2(c): We added together the differences calculated in Steps 2(a) and (b) above to obtain the hospital’s total estimated FY 2008 demonstration cost. • Step 2(d): Then, in order to calculate the hospital’s estimated FY 2010 demonstration costs, we took the amount calculated in Step 2(c) above and multiplied it by the IPPS market basket percentage increases for FYs 2009 and 2010 as adopted in the respective IPPS final rules and a 2percent annual volume adjustment for FY 2010. For this final rule, we have updated data available for this non-Indian service hospital, which began the demonstration in 2008; specifically, we have a finalized cost report for the cost reporting period beginning January 1, PO 00000 Frm 00228 Fmt 4701 Sfmt 4700 2009. This cost report has calculations for the reasonable cost of inpatient services, determined in accordance with the principles of section 410A of Pub. L 108–173, as well as what the cost amounts would be for the hospital absent the demonstration. Therefore, in this final rule, with respect to Step 2, in order to calculate estimated FY 2009 demonstration costs for the non-Indian Health Service hospital that began the demonstration program in 2008, we subtracted the estimated amount it would have otherwise been paid for inpatient hospital services without the demonstration under the applicable payment system(s) (as indicated on the final settled cost report beginning January 1, 2009) from the estimated costs of such services under the reasonable cost methodology (as indicated on the final settled cost report for this period). Steps 2(a) through (c) below are performed to calculate this estimated amount for the final rule. We note that we are using the cost report beginning January 1, 2009 to represent FY 2009 demonstration costs for this hospital because it corresponds most precisely to FY 2009 and, therefore, we believe correctly represents FY 2009 inpatient costs for the demonstration for that period. • Step 2(a): Specifically, we subtracted the estimated amount that would otherwise be paid under the IPPS for the hospital’s inpatient hospital services (excluding swing beds) for the cost reporting period beginning January 1, 2009 (as indicated on the finalized settled cost report) from the estimated amount to be paid for such services under the reasonable cost methodology (as indicated on the finalized settled cost report for such period). • Step 2(b): Next, we subtracted the estimated amount that would otherwise be paid under section 1888(e)(7) of the Act for the inpatient hospital services associated with the swing beds during the cost reporting period beginning January 1, 2009 (as indicated on the finalized settled cost report) from the estimated amount to be paid for such services under the reasonable cost methodology as indicated on the finalized settled cost report for such period. • Step 2(c): We added together the differences calculated in Steps 2(a) and (b) above to obtain the hospital’s total estimated FY 2009 demonstration cost. • Step 2(d): Then, in order to calculate the hospital’s estimated FY 2010 demonstration costs, we took the amount calculated in Step 2(c) above and multiplied it by the IPPS market basket percentage increase for FY 2010 as adopted in the respective IPPS final E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations rule and a 3-percent annual volume adjustment for FY 2010 since the volume adjustment has been updated in this final rule. Whereas we proposed updates for FYs 2009 and 2010 in the proposed rule, we are only using an update for the latter year in this final rule because we are using more recent cost and payment data, which are obtained from the cost report for cost report period beginning January 1, 2009. Step 3: Under the proposed rule, and for this final rule, in order to calculate the estimated FY 2009 demonstration costs for the Indian Health Service provider, we subtracted the estimated amount the hospital would have otherwise been paid for inpatient hospital services without the demonstration under the applicable payment system (as indicated on the ‘‘as submitted’’ cost report beginning October 1, 2008) from the estimated costs for such services under the reasonable cost methodology (as indicated in the ‘‘as submitted’’ cost report for such period). As proposed, for this final rule, Step 3(a) below is performed to calculate this amount. (As proposed, for this final rule, we are using the cost report beginning October 1, 2008 to represent FY 2009 demonstration costs for this hospital because it corresponds most precisely to FY 2009 and, therefore, we believe correctly represents FY 2009 inpatient costs for the demonstration for that period.) • Step 3(a): Specifically, we subtracted the estimated amount the hospital would have otherwise been paid for inpatient hospital services under the IPPS in the cost reporting period beginning October 1, 2008 without the demonstration (as indicated on the ‘‘as submitted’’ cost report for this period) from the estimated amount to be paid under the reasonable cost methodology for such services (as indicated in the ‘‘as submitted’’ cost report for such period). We note that this provider had no swing beds, therefore, we did not estimate any portion of the costs under section 1888(e)(7) of the Act. • Step 3(b): Next, under the proposed rule, in order to calculate the Indian Health Service provider’s estimated FY 2010 demonstration costs, we multiplied the difference calculated in Step 3(a) above by the IPPS market basket percentage increase for FY 2010 adopted in the FY 2010 IPPS/LTCH PPS final rule and the 2-percent annual volume adjustment. For this final rule, for purposes of step 3(b), in order to calculate the Indian Health Service provider’s estimated FY 2010 demonstration costs, we VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 multiplied the difference calculated in Step 3(a) above by the IPPS market basket percentage increase for FY 2010 adopted in the FY 2010 IPPS/LTCH PPS final rule and a 3-percent annual volume adjustment. Step 4: In the proposed rule, in order to calculate total estimated FY 2010 demonstration costs for all eight ‘‘preexpansion participating hospitals’’, we then added the estimated FY 2010 demonstration costs calculated with proposed rule data in Steps 1(c), 2(d), and 3(b) above. For purposes of this final rule, with respect to Step 4, in order to calculate total estimated FY 2010 demonstration costs for all seven ‘‘pre-expansion participating hospitals’’, we then added the estimated FY 2010 demonstration costs calculated with the final rule data in Steps 1(c), 2(d), and 3(b) above. Step 5: Next, under the proposed rule, in order to calculate total estimated FY 2012 demonstration costs for all eight (seven in this final rule) ‘‘pre-expansion hospitals,’’ we multiplied the amount calculated with proposed rule data in Step 4 above by the FY 2011 IPPS market basket percentage increase adopted in the FY 2011 IPPS/LTCH PPS final rule and the proposed FY 2012 IPPS market basket percentage increase contained elsewhere in the FY 2012 IPPS/LTCH PPS proposed rule and a 2percent annual volume adjustment for FYs 2011 and 2012. Under this final rule, for purposes of Step 5, in order to calculate total estimated FY 2012 demonstration costs for all seven ‘‘pre-expansion hospitals,’’ we multiplied the amount calculated in Step 4 above with the final rule data by the FY 2011 IPPS market basket percentage increase adopted in the FY 2011 IPPS/LTCH PPS final rule and the FY 2012 IPPS market basket percentage increase contained elsewhere in the final rule and a 3-percent annual volume adjustment for FYs 2011 and 2012. We used the FY 2012 IPPS market basket percentage increase adopted in this final rule because it is the most current estimate available at the time of this rule. (The FY 2012 IPPS market basket percentage increase adopted in this final rule is used when the FY 2012 IPPS market basket percentage is used to model the trend of increase which is used in the final budget neutrality adjustment methodology for the reason set forth previously.) Thus, for this final rule, we arrived at the total estimated FY 2012 demonstration costs for all seven currently participating hospitals which must be offset, which is $20,255,315. PO 00000 Frm 00229 Fmt 4701 Sfmt 4700 51703 b. Portion of the FY 2012 Budget Neutrality Adjustment That Accounts for Estimated FY 2012 Demonstration Program Costs for Hospitals Newly Selected to Participate in the Demonstration Program 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 community hospitals may participate in the demonstration program under this section.’’ In the proposed rule, we indicated that 19 hospitals were newly selected to join the demonstration and, therefore, our proposed budget neutrality adjustment was based on data for Medicare inpatient costs and payments from recently submitted cost reports for these 19 hospitals. As indicated in section IV.N.2. of this preamble, 18 hospitals accepted the terms of conditions of the demonstration and agreed to participate. Based on this updated data, for this final rule, we had to adjust our budget neutrality adjustment to account for the estimated costs associated with the 18 hospitals, as opposed to 19 hospitals, that have agreed to participate. As proposed, in order to ensure budget neutrality for the newly selected hospitals, we are including a component in the budget neutrality adjustment factor to the FY 2012 national IPPS rates to account for the estimated FY 2012 costs of those new hospitals. As we proposed, for this final rule, we are generally using ‘‘as submitted’’ cost reports to estimate demonstration costs because they are the most recent cost reports and, therefore, we believe most accurately reflect the hospital’s cost and payment for Medicare inpatient services in the respective year. We note that hospitals were required to submit pages from their most recent cost reports with their applications. For 13 of these hospitals, these cost reports had end dates in FY 2009; for the 5 remaining hospitals, they had end dates in FY 2010. Therefore, in various steps in the methodology below, we begin various estimates with FY 2009 if the hospital submitted a cost report ending in FY 2009, and FY 2010 if the hospital submitted a cost report ending in FY 2010. As we proposed, for this final rule, we are using the following methodology in order to estimate FY 2012 demonstration program costs for the 18 newly selected hospitals. This methodology differs from that in the FY 2011 IPPS/LTCH PPS final rule, E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51704 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations because, at that time, hospitals had not been selected for participation, and thus we had no data specific to those hospitals that would enter the demonstration as a result of its expansion mandated by the Affordable Care Act. Step 1(a): For each hospital that submitted a cost report ending in FY 2009, we subtracted the estimated amount that would be paid for its inpatient hospital services (excluding those associated with swing beds) under the IPPS for such period (as indicated on the ‘‘as submitted’’ cost report for such period) from the estimated amount for reasonable costs for such services (as indicated on the ‘‘as submitted’’ cost report for such period) in order to calculate the difference between the hospital’s estimated cost and payment for its inpatient hospital services (excluding those associated with swing beds) during the cost reporting period ending in FY 2009. Step 1 (b): For each hospital that submitted a cost report ending in FY 2010, we subtracted the estimated amount that would be paid for its inpatient hospital services (excluding those associated with swing beds) under the IPPS (as indicated on the ‘‘as submitted’’ cost report for such period) from the estimated amount for the reasonable cost for such services (as indicated on the ‘‘as submitted’’ cost report for such period) in order to calculate the difference between the hospital’s estimated costs and payment for its inpatient hospital services (excluding those associated with swing beds) during such period. Step 1(c): While a portion of the 18 newly selected hospitals that have swing beds reported estimated costs for those beds, some hospitals did not, namely a portion of the hospitals that submitted cost reports ending in FY 2009. Therefore, we needed to gap-fill in order to account for this issue. For each of the hospitals with swing beds that submitted cost reports ending in FY 2009, but that did not submit with its application estimated costs associated with those swing beds, we assigned an estimated cost for its swing beds based on an average of the estimated costpayment difference associated with the swing beds of the newly participating hospitals that reported such data on their applications. We are assigning estimated costs based on the average of the cost-payment difference for those hospitals that submitted these data, because these hospitals represent a sample of hospitals chosen for the demonstration, which we believe can accurately reflect costs and payment. We believe that these amounts, derived VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 from the applications of the hospitals that submitted these data, accurately reflect this sample because they are hospitals of similar size and circumstances. Furthermore, these hospitals, which submitted the data, were chosen from the same set of States as the overall set of the newly selected hospitals. As proposed, for this final rule, we utilized the methodology in Steps 1(c)(i) through (c)(iii) below to calculate this amount, except we note that, as explained previously, the annual volume adjustment and FY 2012 IPPS market basket percentage increase have changed from the proposed to this final rule based on updated data: • Step 1(c)(i): For each of the hospitals with swing beds that submitted with its application both a cost report ending in FY 2009 and estimated costs of those swing beds during such period, we calculated its estimated cost-payment difference for those swing beds (that is, we subtracted the amount that the hospital estimates will be paid under section 1888(e)(7) of the Act for the inpatient hospital services associated with its swing beds for such period from the amount that the hospital estimates it would be paid for the reasonable costs for such services during such period as those amounts are reported on the hospital’s application) by simply taking this amount from the hospital’s application. • Step 1(c)(ii): Then, for each of the hospitals with swing beds that submitted with its application both a cost report ending in FY 2010 and the estimated costs of those swing beds during such period, we calculated the difference between the estimated costs and payment for those swing beds for such period by simply taking this amount from the hospital’s application. (We note that all hospitals that had swing beds and that submitted cost reports ending in FY 2010 with their application supplied data on the estimated cost and payment for swing bed services on these cost reports.) • Step 1(c)(iii): Next, we totaled all of the individual amounts calculated under Steps 1(c)(i) and (c)(ii) above and then divided this amount by the total number of hospitals that provided data on estimated costs on swing beds in their applications. We used the result of this computation as the estimated cost for the swing beds for each of the hospitals that failed to submit estimated costs for those beds with their applications. • Step 1(d): Then, in order to calculate the total costs during the cost reporting period ending in FY 2009 for each hospital that submitted a cost report ending in FY 2009, we did the PO 00000 Frm 00230 Fmt 4701 Sfmt 4700 following: (a) If the hospital had no swing beds, its total estimated costs for such period is the difference calculated under Step 1(a); (b) If the hospital had swing beds, we added the difference calculated under Step 1(a) with the difference calculated under Step 1(c)(i) or Step 1(c)(iii) as applicable. • Step 1(e): Next, in order to calculate total estimated FY 2009 costs for all of the hospitals that submitted cost reports ending in FY 2009 with their applications, we added together all of the total estimated costs that were calculated for each such hospital under Step 1(d) above. We note that we believe that using cost reports ending in FYs 2009 and 2010 best reflect costs and payment in FYs 2009 and 2010 because these cost reports most closely respond to those fiscal years. • Step 1(f): Then, in order to calculate the total estimated FY 2011 costs for the newly selected hospitals that submitted cost reports ending in FY 2009 with their applications, we multiplied the amount calculated in Step 1(e) above by the FYs 2010 and 2011 IPPS market basket percentage increases adopted in the respective IPPS/LTCH PPS final rules as well as a 3-percent (2-percent in the proposed rule) annual volume adjustment for each of FYs 2010 and 2011. • Step 1(g): Then, in order to calculate the total estimated FY 2010 costs for each hospital that submitted a cost report ending in FY 2010, we did the following: (a) If the hospital had no swing beds, its total estimated costs is the difference calculated under Step 1(b); (b) If the hospital had swing beds, we added the difference calculated under Step 1(b) with the difference calculated under Step 1(c)(ii). • Step 1(h): Next, in order to calculate the total FY 2010 costs for all of the hospitals that submitted FY 2010 cost reports with their applications, we added together all of the total estimated FY 2010 costs calculated for each such hospital under Step 1(g) above. • Step (1)(i): Then, we calculated the total estimated FY 2011 costs for all of the newly selected hospitals that submitted cost reports ending in FY 2010 by multiplying the amount calculated in Step 1(h) above by the FY 2011 IPPS market basket percentage increase adopted in the respective IPPS/ LTCH PPS final rule as well as a 3percent (2-percent in the proposed rule) annual volume adjustment for FY 2011. • Step (1)(j): Next, in order to calculate total estimated FY 2012 demonstration costs for all of the 18 newly selected hospitals, we added together the amounts calculated in Steps 1(f) and 1(i) above and then multiplied E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 this sum by the IPPS FY 2012 market basket percentage increase contained elsewhere in this final rule and a 3percent annual volume adjustment for FY 2012. (We note that, for the proposed rule, we multiplied the amounts calculated in Steps 1(f) and 1(i) by the proposed FY 2012 IPPS market basket percentage increase contained elsewhere in the proposed FY 2012 IPPS\LTCH PPS proposed rule and a 2percent annual volume adjustment. As explained previously, these factors have changed in this final rule based on updated data.) The amount of the estimated FY 2012 demonstration costs for the 18 newly selected hospitals, which must be offset, is $32,196,745. c. Portion of the FY 2012 Budget Neutrality Adjustment to Offset the Amount by Which the Costs of the Demonstration Program in FYs 2007 and 2008 Exceeded the Amount That was Identified in the FYs 2007 and 2008 IPPS Final Rules as the Budget Neutrality Offset for FYs 2007 and 2008 In addition, we proposed that, in order to ensure that the demonstration program in FYs 2007 and 2008 was budget neutral, we would incorporate a component into the budget neutrality adjustment factor to the FY 2012 national IPPS rates, which would offset the amount by which the demonstration program costs as indicated by settled cost reports beginning in FYs 2007 and 2008 for hospitals participating in the demonstration program during FYs 2007 and 2008 exceeded the amount that was identified in the FYs 2007 and 2008 IPPS final rules as the budget neutrality offset for FYs 2007 and 2008. Specifically, we proposed the following methodology (this is the same methodology as used in the FY 2011 IPPS/LTCH PPS final rule, but we added detail): • Step One: Calculate the costs of the demonstration program for each of FYs 2007 and 2008 according to the settled cost reports that began in FYs 2007 or 2008 for the then participating hospitals (which represent the third and fourth years of the demonstration program for each of the then participating hospitals) and then add these two sums together. The costs of the demonstration program for each of FYs 2007 and 2008 is the difference resulting from subtracting the total amount that would otherwise be paid to the then participating hospitals under the applicable payment system(s) (that is, under the IPPS and under section 1888(e)(7) of the Act to the extent the participating hospital had swing beds) without the demonstration from the amount paid to those hospitals under the demonstration payment VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 methodology in section 410A(b) of Public Law 108–173. (We proposed to use these settled cost reports, which represent the third and fourth years of the demonstration program for each of the then participating hospitals, because we believed they correctly represent inpatient costs for the demonstration program during each of those 2 years. These settled cost reports represent the third and fourth years of the demonstration, because the demonstration started with cost report start dates on or after October 1, 2004. Therefore, the first year of the demonstration program would be represented by cost reports with a start date between October 1, 2004 and September 30, 2005 (that is, FY 2005; the second year of the demonstration program is represented by cost reports with start date between October 1, 2005 and September 30, 2006 (FY 2006); the third year of the demonstration program is represented by cost reports with start date between October 1, 2006 and September 30, 2007 (FY 2007); the fourth year of the demonstration program is represented by cost reports with start date between October 1, 2007 and September 30, 2008 (FY 2008). • Step Two: Subtract the amount that was offset by the budget neutrality adjustment for FYs 2007 and 2008 ($9,197,870 for FY 2007 and $9,681,893 for FY 2008) from the combined costs of the demonstration program in FYs 2007 and 2008 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 proposed budget neutrality adjustment to the proposed national IPPS rates for FY 2012. This specific component to the overall budget neutrality adjustment for FY 2012 would account for the difference between the combined costs of the demonstration program in FYs 2007 and 2008 and the amount of the budget neutrality adjustment published in the FYs 2007 and 2008 IPPS final rules and, therefore, would ensure that the demonstration program is budget neutral for FYs 2007 and 2008. Because of delays in the settlement process for the demonstration hospitals’ third and fourth year cost reports, that is, for cost reporting periods starting in each FYs 2007 and 2008 respectively, we were unable in the proposed rule to state the costs of the demonstration program corresponding to FYs 2007 and 2008 for purposes of determining the amount by which the costs corresponding to FYs 2007 and 2008 exceeded the amount offset by the budget neutrality adjustment for FYs PO 00000 Frm 00231 Fmt 4701 Sfmt 4700 51705 2007 and 2008. Similarly, for this final rule, we are unable to identify the specific numeric amount representing this offsetting process that can be incorporated into the budget neutrality adjustment applied to the national IPPS rates due to delays in the settlement process for the demonstration hospitals’ third and fourth year cost reports. We note that we anticipate that they may be available for the FY 2013 IPPS/LTCH PPS proposed and final rules. Therefore, the estimated adjustment to the national IPPS rates in this final rule cannot include a component to account for these costs. For this FY 2012 IPPS/LTCH PPS final rule, the estimated amount for which an adjustment to the national IPPS rates is being calculated is the sum of the amounts specified in sections IV.N.3.a. and IV N.3.b. of this final rule, which is $52,452,060 (this estimate does not account for the numeric result of the method in IV.N.3.c.). Sections IV.N.3.a. and IV.N.3.b. of this final rule state dollar amounts, which represent estimated costs attributable to the demonstration program for the respective component of the overall estimated calculation of the final budget neutrality factor for FY 2012. 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, (that is, settled) or, if ‘‘as submitted,’’ recently available cost reports. Comment: One commenter pointed out that if the newly participating hospitals’ cost reports for the preceding year are not settled, or the hospital is appealing certain determinations made by the fiscal intermediary or MAC, the target amount for any year under the demonstration program may be subject to change. The commenter asked whether cost reports would have to be reopened to reflect the final settlement of the years in which the respective target amount is developed. Response: We will approach this issue consistent with standard cost report review. O. Bundling of Payments for Services Provided to Outpatients Who Later Are Admitted as Inpatients: 3-Day Payment Window 1. Background Section 1886(a)(4) of the Act includes in the definition of ‘‘operating costs of inpatient hospital services’’ the cost of diagnostic services (including clinical diagnostic laboratory tests) ‘‘or other services related to the admission’’ (as defined by the Secretary) furnished by E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51706 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations the hospital (or by an entity that is wholly owned or operated by the hospital) to the patient during the 3 days preceding the date of the patient’s admission to a subsection (d) hospital subject to the IPPS. For a nonsubsection (d) hospital (psychiatric hospitals and units, inpatient rehabilitation hospitals and units, longterm care hospitals, children’s hospitals, and cancer hospitals), the statutory payment window is 1 day preceding the date of the patient’s admission. Section 102(a)(1) of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111–192, enacted on June 25, 2010) specifies that the term in section 1886(a)(4) of the Act, ‘‘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.’’ Public Law 111–192 makes no changes to the existing policy regarding billing for diagnostic services. Under the 3-day (or 1-day) payment window policy, all outpatient diagnostic services furnished to a Medicare beneficiary by a hospital (or an entity wholly owned or operated by the hospital), on the date of a beneficiary’s admission or during the 3 days (1 day for a non-subsection (d) hospital) immediately preceding the date of a beneficiary’s inpatient hospital admission, must be included on the Part A bill for the beneficiary’s inpatient stay at the hospital. All outpatient nondiagnostic services provided by the hospital (or an entity wholly owned or wholly operated) on the date of the inpatient admission or during the 3 days (1 day for a non-subsection (d) hospital) immediately preceding the date of a beneficiary’s inpatient hospital admission are deemed related to the admission and must be billed with the inpatient stay unless the hospital attests that specific nondiagnostic services are unrelated to the hospital claim. Further, section 102(c) of Public Law 111–192 prohibits the reopening of a claim, adjusting a claim, or making VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 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. In an interim final rule with comment period issued in the Federal Register on August 16, 2010 (75 FR 50346 through 50349), we discussed and made changes to the Medicare regulations pertaining to the 3-day payment (or, if applicable, 1-day) window policy in order to comport with the requirements of section 102 of Pub. L. 111–192. We refer readers to that interim final rule with comment period for further information about the 3-day (or, if applicable, 1-day) payment window policy. We had received public comments on the August 16, 2010 interim final rule with comment period, and we indicated in the FY 2012 IPPS/LTCH PPS proposed rule that we planned to address these public comments as well as any public comments we may receive on the proposals in the proposed rule in this FY 2012 IPPS/LTCH PPS final rule. Comment: One commenter supported the statutory and regulatory changes made to the 3-day payment window provision. One commenter asked for clarification of the timeframe for submitting claims based on the requirements of section 102(c) of Public Law 111–192. The commenter’s understanding is that a hospital must have identified any unrelated nondiagnostic services for which it wished to bill separately on an outpatient claim for services provided prior to June 25, 2010, and cannot file an adjustment claim now to unbundle any such services from the inpatient admission if it did not originally do so prior to June 25, 2010. The commenter’s assumption is that providers can file an adjustment claim for services that have been billed since June 25, 2010. The commenter suggested that CMS make a simple statement to that effect so it is PO 00000 Frm 00232 Fmt 4701 Sfmt 4700 unambiguous to providers that this statutory provision only applies to services provided prior to June 25, 2010. Response: Section 102(c) of Public Law 111–192 prohibits us from reopening a claim, adjusting a claim, or making payment pursuant to any request for payment, submitted for other services related to the admission, which were previously included on a claim or request for payment for which a reopening, adjustment, or request for payment under Part B was not submitted prior to June 25, 2010. Hospitals may bill Medicare separately for outpatient nondiagnostic services furnished prior to June 25, 2010, provided that: (1) The services are not related to an inpatient stay (the determination of ‘‘related’’ for services furnished prior to June 25, 2010 is based on guidance published in the Federal Register on February 11, 1998 (63 FR 6866)); (2) such services were not previously included on a Medicare claim; and (3) the claim meets all applicable filing deadlines. Section 102(c) of Public Law 111–192 does not preclude a provider from submitting a new Medicare Part B claim and a Part A adjustment claim for the purpose of unbundling outpatient services that the provider believes were improperly bundled with an inpatient claim, in circumstances where all of the following conditions are met: (a) The outpatient services were furnished to a beneficiary on or after June 25, 2010; (b) the outpatient services were not provided on the same calendar day as a beneficiary’s inpatient admission; (c) the outpatient services were nondiagnostic; (d) the provider attests that the outpatient services were clinically unrelated to the beneficiary’s inpatient admission and such claim is supported by documentation in the patient’s medical record; and (e) the claim meets all applicable filing deadlines. Comment: Some commenters urged CMS to consider providing guidance as to how providers may establish policies and procedures for identifying nondiagnostic services that are unrelated to the admission, and what those policies and procedures should consider in making this determination. One of the commenters recognized that CMS looks to hospitals to make this determination, but given the volume of questions about the payment window policy for Medicare both prior to and since the statutory change, the commenter stated that it seems many hospitals remain confused about how to make that determination. Some commenters requested that CMS clearly define ‘‘clinically E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations associated’’ outpatient nondiagnostic services in the Medicare Claims Processing Manual to avoid further confusion in the hospital community regarding what constitutes unrelated outpatient nondiagnostic services. According to one of the commenters, lack of a clear definition of clinically associated services could cause confusion and more complications under post-review audits. One commenter supported the continued use of an exact match (for all digits) between the ICD–9–CM principal diagnosis code assigned for both the preadmission services and the inpatient stay to identify services that are clinically associated with the admission. Another commenter did not support using ICD–9–CM codes to define what is related and what is not related and suggested that all continuous services are by definition related services. According to one of the commenters, it will be substantially difficult for billing systems to present an opportunity for the hospital to determine when to unbundle such services in any reasonable way short of holding claims from being generated and submitted for what may amount to a very large number of inpatient claims, and this may serve to slow down the billing process for those claims. The commenter contended that most billing systems for hospital services have capabilities to define bundling rules for diagnostic services that should always be bundled into the inpatient admission for billing purposes. However, for bundling of nondiagnostic services (or for unbundling), the commenter believed that a manual process was necessary so that hospitals would not make perfunctory decisions regarding when to bundle or not bundle. The commenter was concerned that this could lead to hospitals always making the determination to bundle to save the administrative time, effort, and cost to unbundle or to define rules to always unbundle particular nondiagnostic services without assuring that they should truly be unbundled. Response: In accordance with section 1886(a)(4) of the Act, outpatient nondiagnostic services furnished within the 3-day (or, if applicable, 1-day) window that are related to an inpatient admission must be bundled with the billing of the inpatient stay. An outpatient nondiagnostic service is related to the admission if it is clinically associated with the reason for a patient’s inpatient admission. As we discussed above and in the interim final rule with comment period issued in the Federal Register on August 16, 2010 (75 FR VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 50346 through 50349), section 102 of Public Law 111–192 broadened the definition of related outpatient nondiagnostic services. Adopting the definition that CMS had prior to June 25, 2010, for related nondiagnostic services, as suggested by one of the commenters (that is, there would need to be an exact match (all 5 digits) between the principal diagnosis code assigned for both the preadmission services and the inpatient stay) would be too narrow and would impermissibly limit the number and scope of outpatient nondiagnostic services that are clinically related to the admission and should be bundled with the inpatient stay payment. In response to the commenter who requested that all continuous services (for example, inpatient admission through the emergency department, hospitalization for complications after outpatient surgery, among others) be considered related services and be included in the inpatient stay, we believe that may result in services being bundled in the inpatient stay that are not related to the admission. However, we will take these comments into consideration as we develop updates to the Medicare instructions in the future. Comment: One commenter urged CMS to delay the effective date of this policy to April 1, 2011, because— (1) Hospitals did not have a policy in place on June 25, 2010, and have not programmed their billing systems to accommodate this policy retroactively. According to the commenter, to ask hospitals to retroactively implement this policy presents a major burden with regard to system changes, as well as claims rebilling and/or adjusting; and (2) The creation of the condition code or modifier is administered through the National Uniform Billing Committee and should follow that body’s guidelines that state approved changes are usually effective April 1, October 1, or about 90 days after approval, as appropriate. Response: Section 102(a) of Public Law 111–192 pertains to the 3-day (or 1-day) payment window and was effective for services furnished on or after the date of enactment, June 25, 2010. CMS does not have the authority to delay the enactment of this law. Comment: Some commenters were concerned that hospitals have not historically included the diagnosis and procedures codes from the outpatient services on the inpatient claim, only the charges. The commenters were concerned that inclusion of the diagnosis codes from the outpatient claim could impact the MS–DRG assignment as well as have health PO 00000 Frm 00233 Fmt 4701 Sfmt 4700 51707 statistic and quality reporting implications. The commenters also were concerned with the administrative burden of having to recode the outpatient procedures from CPT–4 codes, which are reported in the outpatient setting, to ICD–9–CM codes, which are reported in the inpatient setting. The commenters also raised questions regarding the type of documentation that will be required to support adding the code to an inpatient claim. Response: As we specified in a memorandum to hospitals explaining the policy changes pertaining to nondiagnostic services subject to the payment window (dated August 9, 2010 and distributed to hospitals through the fiscal intermediaries/MACs), hospitals must include on a Medicare claim for a beneficiary’s inpatient stay the diagnoses, procedures, and charges for all preadmission outpatient diagnostic services and all admission-related preadmission outpatient nondiagnostic services. We note that, in combining on the inpatient bill the diagnoses, procedures, and charges for the outpatient services, a hospital must convert CPT–4 codes to ICD–9–CM codes and include outpatient diagnostic and admission-related nondiagnostic services that span the period of the payment window. We are aware that the inclusion of some diagnosis codes reported on the outpatient claim that are bundled into the inpatient stay may affect the MS–DRG assignment. Also, the inclusion of an outpatient surgical procedure that is converted from CPT– 4 coding to ICD–9–CM coding for inpatient reporting may affect the MS– DRG assignment of the inpatient claim. The law requires that preadmission diagnostic services and related nondiagnostic services be included on the claim for the inpatient admission. Therefore, in some cases, including such services on the inpatient claim may affect the MS–DRG assignment and, when appropriately included, is permissible. The process of bundling claims has remained unchanged. That is, the bundling of claims incorporates transferring all the information reported in the outpatient encounter, such as the diagnosis and procedure codes as well as the charges, to the inpatient setting. We are aware that there are separate ICD–9–CM Coding Guidelines for the inpatient setting and the outpatient setting. Appropriate guidelines should be followed at the time of coding based on the setting of the encounter. We note that the bundling rules for the 3-day (1day) payment window policy do not affect the Coding Guidelines for E:\FR\FM\18AUR2.SGM 18AUR2 51708 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 inpatient and outpatient settings. In response to the commenter’s request for guidance on the type of documentation that would be required to support adding the code to an inpatient claim, the guidance would be the same for reporting any diagnosis on a claim. If there is documentation in the patient’s medical record that confirms that the condition or diagnosis is present, that diagnosis should be reported. 2. Condition Code 51 (Attestation of Unrelated Outpatient Nondiagnostic Services) As we stated in the August 16, 2010 interim final rule with comment period (75 FR 50348), 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. The National Uniform Billing Committee (NUBC) is a committee established by the American Hospital Association and includes the participation of all the major national provider and payer organizations. The NUBC was formed to develop a single billing form and standard data set that could be used nationwide by institutional providers and payers for handling health care claims. The NUBC has provided a mechanism through the establishment of a condition code for a hospital to attest directly on the outpatient claim to specific nondiagnostic services as being clinically unrelated to an inpatient hospital claim (that is, the preadmission diagnostic services are clinically distinct or independent from the reason for the beneficiary’s inpatient admission). As of April 1, 2011, a hospital must add condition code 51 on claims for separately billed outpatient nondiagnostic services furnished on or after June 25, 2010 (the date of enactment of Public Law 111–192) if the hospital wishes to attest to nondiagnostic services as being unrelated to the inpatient hospital claim. We issued a manual system revision through Change Request #7142, Transmittal 796, on October 29, 2010, instructing CMS contractors to accept condition code 51 on outpatient claims. Comment: One commenter supported the use of a condition code but believed that the use of a condition code alone should be sufficient to signify that unrelated outpatient services billed on a separate outpatient claim are distinct VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 from the inpatient services. The commenter discouraged CMS from requiring hospitals to maintain documentation in the beneficiary’s medical record to support their claim that the outpatient services are related. Another commenter disagreed with the proposal to implement an attestation process. The commenters stated that it would require additional administrative effort by hospital staff that does not seem necessary, as claims are required to be filed correctly under the law. According to the commenter, if an attestation is required, the attestation process should be easy to follow and clearly defined. One commenter was concerned about the ease with which hospitals could apply a condition code and that unwarranted unbundling could still occur, depending on how the standard is defined for nondiagnostic related services. Response: The implementation of condition code 51, effective April 1, 2011, provides a process for hospitals to attest to nondiagnostic services as being unrelated to the inpatient hospital claim when a hospital submits an outpatient claim. However, upon review, the hospital must be able to document that the services are unrelated based on information in the patient’s medical record. As we stated in the interim final rule with comment period issued in the Federal Register on August 16, 2010 (75 FR 50348), hospitals have experience with making similar attestations on the outpatient or inpatient claim. 3. Applicability of the Payment Window Policy to Services Furnished at Physicians’ Practices We have received several inquiries regarding the applicability of the payment window to preadmission services furnished at hospital-owned or hospital-operated physicians’ clinics or practices. The statutory language under section 1886(a)(4) of the Act is clear that the 3-day (or, where applicable, 1-day) payment window policy applies not only to diagnostic and related nondiagnostic services furnished to patients at hospitals, but also to those services furnished at entities that are wholly owned or operated by the admitting hospital. In a 1998 final rule on payment for preadmission services (63 FR 6866), we stated, ‘‘A hospitalowned or hospital-operated physician clinic or practice is subject to the payment window provision. The technical portion of preadmission diagnostic services performed by the physician clinic or practice must be included on the inpatient bill and may not be billed separately. A physician’s PO 00000 Frm 00234 Fmt 4701 Sfmt 4700 professional service is not subject to the window.’’ Thus, we made clear that the term ‘‘entities’’ under this section of the statute includes physicians’ clinics or practices. Although the 1998 rule provides specific guidance regarding billing for preadmission diagnostic services furnished at hospital-owned or hospital-operated physician’s practices, we had issued no guidelines regarding billing for preadmission nondiagnostic services provided by a hospital-owned or hospital-operated physician’s practice. Prior to the June 25, 2010 enactment of section 102(a)(1) of Public Law 111– 192, the payment window policy for preadmission nondiagnostic services was rarely applicable because the policy required an exact match between the principal ICD–9 CM diagnosis codes for the outpatient services and the inpatient admission. Because of the exact match policy, very few services furnished in a physician’s office or clinic that is wholly owned or operated by the hospital would have been be subject to the policy. However, the change to the payment window policy made by Public Law 111–192 broadened the definition of nondiagnostic services that are subject to the payment window to include any nondiagnostic service that is clinically related to the inpatient admission, regardless of whether the inpatient and outpatient diagnoses are the same. As a result, this statutory change broadens the applicability of the payment window policy in hospitalowned or hospital-operated physician offices or clinics (that is, clinics that are not provider-based but are wholly owned or operated by the hospital). We note that, under the amended statute, in order to be able to bill separately for nondiagnostic preadmission services that fall within the payment window, hospitals and hospital-owned or hospital-operated entities must now attest that the services are not related to an admission by using condition code 51 (Attestation of Unrelated Outpatient Nondiagnostic Services) when billing for the services. In response to ongoing requests to clarify the applicability of the payment window policy to preadmission nondiagnostic services provided in hospital-owned or hospital-operated physicians’ offices or clinics, as we did in the proposed rule, we are clarifying that the 3-day (or, where applicable, 1day) payment window policy applies to both preadmission diagnostic and nondiagnostic services furnished to a patient at physician’s practices that are wholly owned or wholly operated by the admitting hospital. For purposes of the payment window, ‘‘wholly owned E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations or operated’’ means that the admitting hospital must be the sole owner or the sole operator of the entity providing the preadmission services. 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 (we refer readers to the regulations at 42 CFR 412.2(c)(5)(i) and to discussions and examples of wholly owned or operated scenarios in rules issued in the Federal Register on January 12, 1994 (59 FR 1656) and February 11, 1998 (63 FR 6865 through 6867)). In the circumstance in which a clinic or a physician office that is not provider-based meets the definition of being wholly owned or wholly operated by the hospital and the 3-day (or, if applicable, 1-day) payment window applies to related nondiagnostic preadmission services, the overhead costs associated with those services would be considered operating costs of inpatient hospital services and, as such, included in the hospital’s bill for the inpatient service. As explained more fully in the CY 2012 Medicare Physician Fee Schedule proposed rule (76 FR 42915), we have proposed that Medicare’s payment to the physician for the physician fee schedule service would be at the lower facility rate, which does not include overhead, staff, equipment, and supplies required to perform the service in the physician’s office (rather than the higher nonfacility rate that does include those overhead costs) in order to avoid duplicate payment for the services under both the IPPS and the Medicare Physician Fee Schedule. Under 42 CFR 414.22(b)(5)(i), Medicare pays physicians using the nonfacility relative value units when services are provided in a physician’s office and bases physician payment on the facility relative value units when the physician provides services in a facility, including hospitals, skilled nursing facilities, community mental health centers, and ambulatory surgical centers. Because a hospital-owned or hospital-operated physician practice or clinic that is not provider-based is a nonfacility setting, we have proposed in the CY 2012 Medicare Physician Fee Schedule proposed rule (76 FR 42915) to change the regulation to reflect the proposal to pay for a service provided in a nonfacility setting at the facility rate in order to comply with section 102(a) of Public Law 111–192. We indicated in the IPPS proposed rule that we intended to discuss such a proposal in more VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 detail in a future physician fee schedule proposed rule and address how this statutory provision will be implemented in physicians’ offices that are wholly owned or wholly operated by the hospital. In all circumstances, we would expect that, in the case of a physician practice that is wholly owned or wholly operated by the hospital, the hospital would inform the physician offices and clinics when an inpatient admission occurs. Comment: One commenter stated that it may be difficult to track activity between hospital-owned practices and the hospital that owns the practices. Response: Due to the fact that the hospital owns the facility, it is our expectation that the hospital will be able to coordinate and track the patient activity of the facilities it owns. The full adoption of electronic medical record should help facilitate coordination and tracking of patients within and among hospital systems. We received a few public comments regarding the applicability of the payment window policy to services furnished at physicians’ practices that are wholly owned or wholly operated by the hospital. We stated in the FY 2012 IPPS/LTCH PPS proposed rule that CMS would address the payment window policy as it impacts physician billing in the CY 2012 Medicare Physician Fee Schedule proposed rule. Therefore, those comments are not within the scope of this IPPS/LTCH final rule. The CY 2012 Medicare Physician Fee Schedule proposed rule (CMS–1524–P) appeared in the Federal Register on July 19, 2011. The deadline for submitting public comments on that proposed rule is August 30, 2011. Instructions for submitting public comments on that proposed rule are included in the proposed rule (76 FR 42772). P. Changes to MS–DRGs Subject to the Postacute Care Transfer Policy 1. Background Existing regulations at § 412.4(a) define discharges under the IPPS as situations in which a patient is formally released from an acute care hospital or dies in the hospital. Section 412.4(b) defines acute care transfers, and § 412.4(c) defines postacute care transfers. Our policy, set forth in § 412.4(f), provides that 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 stay, not to exceed the full MS–DRG payment that would have been made if PO 00000 Frm 00235 Fmt 4701 Sfmt 4700 51709 the patient had been discharged without being transferred. The per diem rate paid to a transferring hospital is calculated by dividing the full 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 45804), 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 MS–DRG payment (§ 412.4(f)(1)). Transfer cases are also eligible for outlier payments. In general, the outlier threshold for transfer cases, as described in § 412.80(b), 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. We established the criteria set forth in § 412.4 for determining which DRGs qualify for postacute care transfer payments in the FY 2006 IPPS final rule (70 FR 47419 through 47420). The determination of whether a DRG is subject to the postacute care transfer policy was initially based on the Medicare Version 23.0 GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is revised, we use the current version of the Medicare GROUPER and the most recent complete year of MedPAR data to determine if the DRG is subject to the postacute care transfer policy. Specifically, if the DRG’s total number of discharges and proportion of short-stay discharges to postacute care exceed the 55th percentile for all DRGs, CMS will apply the postacute care transfer policy to that DRG and to any other MS–DRG that shares the same base DRG. In the preamble to the FY 2006 final rule (70 FR 47419), we stated that ‘‘we will not revise the list of DRGs subject to the postacute care transfer policy annually unless we are making a change to a specific DRG.’’ To account for MS–DRGs subject to the postacute care policy that exhibit exceptionally higher shares of costs very early in the hospital stay, § 412.4(f) also includes special payment methodology. For these MS–DRGs, hospitals receive 50 percent of the full MS–DRG payment, plus the single per diem payment, for the first day of the stay, as well as a reduced per diem payment for subsequent days (up to the full MS–DRG payment (§ 412.4(f)(6)). For an MS–DRG to qualify for the special payment methodology, the geometric mean E:\FR\FM\18AUR2.SGM 18AUR2 51710 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 length of stay must be greater than 4 days, and the average charges of 1-day discharge cases in the MS–DRG must be at least 50 percent of the average charges for all cases within the MS–DRG. DRGs that are part of an MS–DRG group must meet DRG special payment policy if any one of the MS–DRGs that share that same base MS–DRG qualifies (§ 412.4(f)(6)). 2. Changes to the Postacute Care Transfer MS–DRGs Based on our annual review of MS– DRGs, we have identified a number of MS–DRGs that should be included on the list of MS–DRGs subject to the postacute care transfer policy. As we discussed in section III.G. of the proposed rule, in response to public comments and based on our analysis of FY 2010 MedPAR claims data, in the FY 2012 IPPS/LTCH PPS proposed rule, we proposed to make several changes to MS–DRGs to better capture certain severity of illness levels, to be effective for FY 2012. Specifically, we proposed to modify the assignment of the autologous bone marrow transplants now assigned to MS–DRG 015 (Autologous Bone Marrow Transplant) to capture the severity levels of ‘‘with CC/MCC’’ and ‘‘without CC/MCC.’’ We proposed to establish two new MS– DRGs (proposed MS–DRGs 016 and 017 (Autologous Bone Marrow Transplant with MCC/CC and without MCC/CC, respectively) to replace MS–DRG 015. We also proposed to establish three new MS–DRGs to capture three severity of illness levels for skin debridement— proposed MS–DRG 570 (Skin Debridement with MCC); proposed MS– DRG 571 (Skin Debridement with CC); and proposed MS–DRG 572 (Skin Debridement without CC/MCC). In addition, we proposed to move the codes for rechargeable dual array deep brain stimulation (codes 02.93 and 86.98) to MS–DRGs 023 and 024 (Craniotomy with Major Device Implant/Acute Complex CNS PDX, with MCC and without MCC, respectively) where similar devices are currently assigned. We proposed to move two procedure codes that either repair a thoracic aneurysm or place a stent graft (codes 38.45 and 39.73) out of MS–DRG 237 and 238 (Major Cardiovascular Procedures with MCC or Thoracic Aortic Aneurysm Repair, and Major Cardiovascular Procedures with MCC and without MCC, respectively). We proposed to assign these two codes to MS–DRGs 219, 220, and 221 (Cardiac Valve & Other Major Cardiothoracic Procedure without Cardiac Catheterization with MCC, with CC, and without CC, respectively). We proposed VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 to add a procedure code for partial gastrectomy (43.89) to MS–DRGs 619, 620, and 621 (O.R. Procedure for Obesity with MCC, with CC, and without CC/MCC, respectively). A discussion of these proposed changes and our final changes can be found in section II.G. of the preamble of the final rule. In light of the proposed changes to the MS–DRGs, according to the regulations under § 412.4(c), we evaluated these proposed FY 2012 MS–DRGs against the general postacute care transfer policy criteria using the FY 2010 MedPAR data. If an MS–DRG qualified for the postacute care transfer policy, we also evaluated that MS–DRG under the special payment methodology criteria according to regulations at § 412.4(f)(6). As a result of our review, we proposed to update the list of MS–DRGs that are subject to the postacute care transfer policy to include the proposed new MS–DRGs 570, 571, and 572 for FY 2012. (These MS–DRGs were reflected in Table 5, which was listed in section VI. of the Addendum to the proposed rule and available via the Internet, and were also listed in the tables at the end of this section.) In addition, based on our evaluation of the proposed FY 2012 MS–DRGs using the FY 2010 Med PAR data, we identified the following two existing MS–DRGs that meet the criteria to be subject to the postacute care transfer policy for FY 2012: MS–DRGs 023 (Craniotomy with Major Device Implant or Acute Complex CNS PDX with MCC) and MS–DRG 024 (Craniotomy with Major Device Implant or Acute Complex CNS PDX without MCC). We proposed to add these two MS–DRGs to the list of MS–DRGs that are subject to the postacute care transfer policy for FY 2012. The following table lists the respective criteria for each MS–DRG that we proposed to add to the postacute care transfer policy list. Further, based on our evaluation of the proposed FY 2012 MS–DRGs using the FY 2010 Med PAR data, we determined that MS–DRGs 228 (Other Cardiothoracic Procedures with MCC), 229 (Other Cardiothoracic Procedures with CC), 230 (Other Cardiothoracic Procedures without CC/MCC), 640 (Miscellaneous Disorders of Nutrition, Metabolism, Fluids/Electrolytes with MCC), and 641 (Miscellaneous Disorders of Nutrition, Metabolism, Fluids/Electrolytes without MCC) no longer meet the postacute care transfer criteria. Therefore, we proposed that they be removed from the list of DRGs subjected to the postacute care transfer policy, effective FY 2012. PO 00000 Frm 00236 Fmt 4701 Sfmt 4700 Finally, we determined that MS– DRGs 216 (Cardiac Valve & Other Major Cardiothoracic Procedure with Cardiac Catheterization with MCC), 217 (Cardiac Valve & Other Major Cardiothoracic Procedure with Cardiac Catheterization with CC), and 218 (Cardiac Valve & Other Major Cardiothoracic Procedure without CC/MCC) meet the criteria for the special payment methodology. Therefore, we proposed that they would be subject to the DRG special payment methodology, effective FY 2012. Comment: Several commenters supported the proposed changes to the lists of MS–DRGs subject to the postacute care transfer and special payment policy. Commenters also requested that CMS expand its analysis to remove additional MS–DRGs that no longer meet the postacute care transfer policy criteria and to add MS–DRGs that currently meet special payment policy criteria. Response: As stated in the FY 2006 final rule (70 FR 47419), CMS determined that an annual review of all DRGs ‘‘would likely lead to great volatility in the payment methodology of certain DRGs’’. Therefore, it is our policy to not conduct an annual review of MS–DRGs unless we have proposed to make changes to specific MS–DRGs. We note that, during this rulemaking process, we reviewed additional MS– DRGs for which we were proposing changes to determine whether they meet the postacute care transfer or special payment policy criteria (MS–DRGs (16, 17, 219, 220, 221, 237, 238, 250, 251, 573, 574, 575, 576, 577, 578, 619, 620, and 621). However, in the proposed rule, we only discussed the MS–DRGs that were proposed to be newly added to, or removed from, the postacute care transfer or special payment policy, as listed on Table 5. Following issuance of the proposed rule, we conducted an additional review of MS–DRGs for purposes of finalizing the postacute care transfer and special payment status policy modifications, and that review confirmed that these previously reviewed MS–DRGs do not require any further changes in postacute care transfer or special payment status. During this review, we determined that MS–DRGs 640 (Miscellaneous Disorders of Nutrition, Metabolism, Fluids/Electrolytes with MCC) and 641 (Miscellaneous Disorders of Nutrition, Metabolism, Fluids/Electrolytes without MCC) were inadvertently listed as MS– DRGs for which significant GROUPER logic changes were being proposed. The changes to these MS–DRGs were determined to be descriptive title changes only and not material logic changes. Therefore, considering whether E:\FR\FM\18AUR2.SGM 18AUR2 51711 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations to change the postacute care transfer and special payment policy status for these MS–DRGs was a technical error. Therefore, we are not finalizing our proposed changes for these two MS– DRGs. The remaining proposed changes to the postacute care transfer and special payment policy lists are being finalized as proposed and are summarized in the following tables. We refer readers to the bolded text in the first table to see which criteria were not met in our analysis for each MS–DRG removed from the postacute care transfer policy list. Table 5, which is listed in section VI. of the Addendum to this final rule and available through the Internet on the CMS Web site, lists all MS–DRGs for FY 2012 and specifies whether or not they are subject to the postacute care transfer policy and the special payment policy. For FY 2012, there are a total of 275 MS–DRGs subject to the postacute care transfer policy, and 30 MS–DRGs meet the special payment policy criterion. LIST OF MS–DRGS CHANGING POSTACUTE CARE TRANSFER POLICY STATUS IN FY 2012 MS–DRG MS–DRG Title 023 ............... CRANIO W MAJOR DEV IMPL/ACUTE COMPLEX CNS PDX W MCC OR CHEMO IMPLANT. CRANIO W MAJOR DEV IMPL/ACUTE COMPLEX CNS PDX W/O MCC. OTHER CARDIOTHORACIC PROCEDURES W MCC. OTHER CARDIOTHORACIC PROCEDURES W CC. OTHER CARDIOTHORACIC PROCEDURES W/O CC/MCC. SKIN DEBRIDEMENT W MCC .......................... SKIN DEBRIDEMENT W CC ............................. SKIN DEBRIDEMENT W/O CC/MCC ................ 024 ............... 228 ............... 229 ............... 230 ............... 570 ............... 571 ............... 572 ............... Postacute care transfers (55th percentile: 1,596) Short-stay postacute care transfers Percent of short-stay postacute care transfers to all cases (55th percentile: 8.0037%) 4,631 2,225 373 8.05 YES 1,745 *1,000 161 9.23 YES** 1,936 *1,223 456 23.55 NO 2,395 *1,322 421 17.58 NO 640 *228 11 *1.72 NO 5,189 5,538 2,539 3,968 3,832 *1,378 1,558 1,087 226 30.03 19.63 8.90 YES YES YES** Total cases Postacute care transfer policy status * Indicates a current postacute care transfer policy criterion that the MS–DRG did not meet. ** As described in the policy at 42 CFR 412.4(d)(3)(ii)(D), MS–DRGs that share the same base MS–DRG shall all meet postacute care transfer policy if any one of the MS–DRGs that share that same base MS–DRG qualifies. LIST OF MS–DRGS CHANGING DRG SPECIAL PAYMENT POLICY STATUS IN FY 2012 Geometric mean length of stay MS–DRG MS–DRG Title 216 ............... CARDIAC VALVE & OTH MAJ CARDIOTHORACIC PROC W CARD CATH W MCC. CARDIAC VALVE & OTH MAJ CARDIOTHORACIC PROC W CARD CATH W CC. CARDIAC VALVE & OTH MAJ CARDIOTHORACIC PROC W CARD CATH W/O CC/MCC. 217 ............... 218 ............... mstockstill on DSK4VPTVN1PROD with RULES2 Q. Hospital Services Furnished Under Arrangements In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25964 and 25965), we stated that, for purposes of Medicare payment, section 1861(b) of the Act defines ‘‘inpatient hospital services’’ in part as ‘‘* * * the following items and services furnished to an inpatient of a hospital and (except as provided in paragraph (3)) by the hospital: (1) Bed and board; (2) such nursing services and other related services, such use of hospital facilities, and such medical social services as are ordinarily furnished by the hospital for the care and treatment of inpatients * * *; and VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Frm 00237 Fmt 4701 Sfmt 4700 Special payment policy status 14.2497327 $164,838 125,398 YES 9.518336312 126,655 84,669 YES 7.102572558 0 0 YES (3) such other diagnostic or therapeutic items or services, furnished by the hospital or by others under arrangements with them made by the hospital, as are ordinarily furnished to inpatients either by such hospital or by others under such arrangements.’’ We noted that the statute specifies that ‘‘routine services,’’ for example, bed, board, nursing and other related services, except those specified at paragraph (3) of section 1861(b) of the Act are to be provided by ‘‘the hospital,’’ and not just ‘‘a hospital.’’ Similarly, we noted that our implementing regulations at 42 CFR 409.12 indicate that Medicare pays for ‘‘nursing and related services, use of PO 00000 50% of average charges for all cases within MS– DRG Average charges of 1-day discharges hospital * * * facilities, and medical social services as * * * inpatient hospital services or inpatient CAH services . . . only if those services are ordinarily furnished by the hospital or CAH.’’ We pointed out that, consistent with the statute, only with regard to other diagnostic or therapeutic services do the regulations at 42 CFR 409.16 state that Medicare will also pay for these services if furnished ‘‘by others under arrangements made by the hospital or CAH.’’. Instructions at section 2118 (Cost of Services Furnished under Arrangement) of the Provider Reimbursement Manual, Part I (PRM–I), relating to payment for routine services, allow additional E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51712 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations services to be provided under arrangements. It had come to our attention that some providers in the hospital community have interpreted the provision relating to services provided ‘‘under arrangement’’ under section 2118 of the PRM–I to mean that even routine services described in sections 1861(b)(1) and (b)(2) of the Act, which are normally provided to hospital inpatients by the hospital, can be provided outside the hospital by an outside entity under arrangement. To the extent that our manual provisions could be read to allow hospitals to furnish such ‘‘routine services’’ ‘‘under arrangement,’’ we proposed a change to limit the services a hospital may provide under arrangement to reflect the statutory definition of ‘‘inpatient hospital services’’ and the implementing regulations. Under our proposed policy, if routine services, that is, services described in sections 1861(b)(1) and (b)(2) of the Act, are provided in the hospital, they are considered as being provided ‘‘by the hospital .’’ We stated that we believe that this proposal is consistent with the statute because the statutory language specifying that the routine services described in sections 1861(b)(1) and (b)(2) of the Act be provided ‘‘by the hospital’’ suggests that the hospital is required to exercise professional responsibility over the services, including quality controls. In situations in which certain routine services are provided through arrangement ‘‘in the hospital,’’ for example, contracted nursing services, we believe the arrangement generally results in the hospital exercising the same level of control over those services as the hospital does in situations in which the services are provided by the hospital’s salaried employees. Therefore, if routine services are provided in the hospital to its inpatients, we consider the service as being provided by the hospital. However, if these services are provided to its patients outside the hospital, the services are considered as being provided under arrangement, and not by the hospital. Therefore, consistent with the statute, only therapeutic and diagnostic services can be provided under arrangement outside the hospital. We indicated that if we finalized this policy, we would change the provisions of section 2118 of the PRM–I accordingly. We received numerous comments from the hospital provider community as well as several provider organizations. A few commenters had singular, limited comments; the majority of commenters presented VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 arguments, similar in content, against adopting our proposed change to limit the services a hospital could provide under arrangement. Comment: Commenters argued that our proposal to limit the services a hospital may provide under arrangements is not required by the statute or regulations. Commenters also believed that CMS’ proposed reading of the statutory definition of inpatient hospital services is only one possible interpretation of the statute. Furthermore, commenters stated that CMS’ ‘‘use of the definition of inpatient hospital services as the basis for its proposal may not be appropriate’’ and concluded that, under our proposal, ‘‘routine services, including ICU services, would not be considered to be inpatient hospital services,’’ but that we did not state ‘‘what such services would be if not inpatient hospital services * * *.’’ Response: In the proposed rule, we focused our discussion on section 1861(b) of the Act because it provides the statutory basis for our policy to limit the services that may be furnished under arrangement. As we noted in the proposed rule, the reference to diagnostic or therapeutic items or services in section 1861(b)(3) of the Act includes the language, ‘‘[furnished by] * * * or by others under arrangements.’’ Therefore, we believe it is consistent with the statutory language to limit the services that may be furnished outside of a hospital under arrangement to only diagnostic and therapeutic services. Our policy does not alter the definition of inpatient hospital services, but instead limits the services a hospital may provide under arrangements outside the hospital. Under our proposal, if a patient of Hospital A is in Hospital B receiving routine services, the patient will still be an ‘‘inpatient,’’ but the services will not be considered ‘‘inpatient hospital services’’ furnished by the hospital for purposes of payment for services defined under section 1861(b) of the Act. If the patient is admitted to Hospital B, then the patient would be an ‘‘inpatient’’ of Hospital B and the routine services furnished to that individual would meet the definition of ‘‘inpatient routine services’’ under section 1861(b) of the Act. Comment: Commenters wrote that there are ‘‘specific statutory provisions * * * that would allow hospitals to use the type of arrangements CMS is proposing to prohibit,’’ and argued that, ‘‘CMS’s reliance on the tangentiallyrelated hospital inpatient services definition as the basis for its proposal PO 00000 Frm 00238 Fmt 4701 Sfmt 4700 seems to be an end-run around them.’’ Section 1862(a)(14) of the Act was cited as specific statutory authority that allows hospitals to furnish all categories of inpatient hospital services under arrangement. Commenters noted that this provision does not limit the type of entity that may furnish services under arrangement nor specify what services may be provided under arrangement. Response: We disagree with this position. Section 1862(a)(14) of the Act states, in part, that payment under Part A or Part B may not be made for certain services ‘‘furnished to an individual who is a patient of a hospital or critical access hospital by an entity other than the hospital or critical access hospital, unless the services are furnished under arrangements * * * with the entity made by the hospital or CAH.’’ Although we agree with the commenters that the language of section 1862(a)(14) of the Act does not place restrictions on what services may be provided under arrangement, it does not specifically authorize the furnishing of routine services to be provided under arrangement, nor does it conflict with the interpretation of section 1861(b) of the Act set forth in the proposed rule. Instead, when read in conjunction with section 1861(b) of the Act, as interpreted in our proposal, the language ‘‘furnished under arrangements’’ in section 1862(a)(14) of the Act is limited to only those services that may be furnished under arrangement consistent with our proposed policy. Comment: Commenters discussed a decision of the Provider Reimbursement Review Board (PRRB) in which pulmonary intensive care services were furnished under arrangements to patients of one hospital by another hospital located across the street (University of Missouri Med. Ctr. v. BCBSA, PRRB Dec. No. 79–D82, Medicare & Medicaid Guide (CCH) 30, 317 (Nov. 28, 1979)). The PRRB found that ‘‘routine inpatient services provided under arrangement * * * are allowable costs and are incorporated in the provider’s costs of routine services.’’ The PRRB also found that the services were properly furnished under arrangements. Commenters noted that the CMS Administrator did not modify or reverse this decision, and thereby, it was the final decision of the Secretary. Response: We recognize that certain routine services have previously been provided under arrangements, and we are now changing this policy to preclude a hospital from furnishing routine services under arrangements with another entity unless the services are provided in the hospital in which the patient has been admitted as an E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations inpatient. We note that the date of this PRRB decision was November 28, 1979. This was 3 years prior to the statutory payment provisions included in the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, which sets Medicare payment based on reasonable costs subject to a ceiling, and 4 years prior to implementation of the IPPS. We point out that both hospitals involved in the PRRB case were paid under the same Medicare payment provisions at that time, that is, routine cost limits. As discussed in greater detail below, we have decided to change this policy because we are concerned that similar arrangements between entities that are not paid under the same Medicare payment provisions—for example, arrangements between IPPS hospitals and hospitals excluded from the IPPS— have resulted in hospitals receiving payments for services based on payment provisions that do not ordinarily apply to that facility. Comment: One commenter cautioned that CMS should recognize that there are regulations that allow hospitalswithin-hospitals (HwHs) to obtain other services through contract or other agreements. The commenter specifically cites the requirement that a HwH ‘‘performs the basic functions of [a hospital] through the use of employees or under contracts or other agreements with entities other than the hospital occupying space in the same building or on the same campus * * *’’ This requirement further states that food and dietetic services, housekeeping, maintenance, among others, could be obtained under contracts or agreements with the co-located hospital. The commenter urged CMS to clarify that the proposed change will not impact a HwH’s ability to obtain the necessary services that are allowed under the HwH requirements at 42 CFR 412.22. Response: We developed the HwH regulations to ensure, to the extent possible, that co-located hospitals (two hospitals occupying space in the same building or in one or more separate buildings located on the same campus) function as two separate entities, each having its own governing body, medical staff, chief medical officer, and chief executive officer. In addition, the HwH has to meet other criteria, including at least one of the criteria specified in § 412.22(e)(1)(v), regarding performance of basic hospital functions. Under the changes to our policy governing services furnished under arrangements that we are finalizing in this final rule, the services that can be furnished to the HwH under § 412.22(e)(1)(v)(A) (food and dietetic services, housekeeping and maintenance, and other services VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 necessary to maintain a clean and safe physical environment) by the host hospital or an entity that controls both hospitals could still be furnished at the hospital (the HwH) to that hospital’s patients. Likewise, the provision at § 412.22(e)(1)(v)(A) allowing specified basic functions to be performed at a HwH through the use of employees or under contracts or other arrangements with entities other than the co-located hospital, or through a third entity that controls both hospitals, would only apply where those routine services are furnished at the HwH. If, however, the HwH was moving its patients to another hospital to receive routine services under arrangements with that hospital, and maintaining that patient in hospital records as its own inpatient, it would not be allowed under the changes to the ‘‘hospital services provided under arrangement’’ that we are finalizing in this final rule. Comment: One commenter was concerned with what it characterized as CMS’ lack of clarity about why it proposed this change. The commenter recommended that CMS not finalize the proposal until it provides a sufficient policy rationale for the proposal, or explains the circumstances that are causing CMS to be concerned. Response: As noted above, we became aware that some hospitals were furnishing certain routine services, including ICU services, under arrangement. For example, under certain arrangements, if an inpatient of an IPPS-excluded hospital (‘‘hospital A’’) required ICU services, and the IPPSexcluded hospital could not provide these services, the patient was moved to an IPPS hospital (‘‘hospital B’’) that could furnish the ICU services. In these situations, the patient was not transferred to hospital B but was moved from an inpatient bed of hospital A to an inpatient bed of hospital B. However, the IPPS-excluded hospital treated these services as being provided under arrangement and included the cost of those services on its cost report. We find it problematic that the patient was, at all times, considered an inpatient of hospital A even though the patient occupied an inpatient bed at hospital B. Because the two hospitals in the example above are under two different payment systems, we believe this arrangement can result in inappropriate and potentially excessive Medicare payments. The IPPS-excluded hospital, hospital A, is paid on a reasonable cost basis, subject to a ceiling. In most cases, this payment is greater than if the hospital were paid under the IPPS for the same patient. Furthermore, although there is a ceiling on the amount of PO 00000 Frm 00239 Fmt 4701 Sfmt 4700 51713 Medicare payment for hospital A, there are also provisions that allow hospital A to receive adjustments to its ceiling in certain circumstances, which could allow payment to hospital A above those allowed by its ceiling. Therefore, these current arrangements could allow hospital A to request an adjustment to its ceiling because its ICU costs have increased beyond what is allowed. In that case, hospital A would receive additional payments beyond its ceiling. We believe that by limiting the furnishing of routine services under arrangements to situations in which the services are furnished in hospital A, we will reduce the opportunity for gaming. In these more limited situations, hospital A will exercise sufficient control over the use of hospital resources when furnishing these services such that the services are appropriately included in hospital A’s cost report. Under our proposal, if hospital A did not have the resources to treat a patient, it would transfer the patient to hospital B for ICU services, and hospital B would bill Medicare consistent with the IPPS provisions. Hospital A would be paid for an inpatient discharge. Comment: Numerous commenters believed that CMS’ primary goal in proposing to limit the kinds of services that can be provided under arrangement was to ensure that the hospital will exercise professional responsibility over the ‘‘arranged for’’ services. Commenters claimed that CMS had provided no evidence that the hospital furnishing the routine or ICU services cannot exercise the same responsibility. Therefore, the commenters claimed that CMS had not provided a sufficient policy rationale in support of the proposal. Response: Section 207 of the Hospital Manual (Pub. No. 10) states with respect to furnishing services under arrangements, that such arrangements were ‘‘not intended that [the hospital] merely serve as a billing mechanism for the other party * * *.The hospital’s professional supervision * * * requires many of the same quality controls as are applied to the services furnished by salaried employees.’’ As discussed in more detail above, the current policy may also result in inappropriate and excessive Medicare payments, as well as present an opportunity for gaming, and we believe it is appropriate to limit the inclusion of costs on a cost report to those situations in which the hospital has exercised sufficient control and responsibility over the use of hospital resources in treating patients. Comment: One commenter cited two recent Medicare initiatives that involve ACOs, the Pioneer ACO Program under E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51714 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations the Innovation Center and the Medicare Shared Savings Program under section 1899 of the Affordable Care Act, as evidence of the Secretary’s commitment to high-level efficiency, provider collaboration, and innovative service models which will preserve or enhance quality of care for beneficiaries while promoting greater efficiencies throughout the Medicare program. The commenter noted that the present policy that CMS has proposed to disallow, where a hospital furnishing ICU services ‘‘under arrangements’’ to inpatients of another hospital is an existing example of efficient use of medical resources as well as successful provider collaboration that also enhances the level of beneficiary care and therefore, allowing such an arrangement to continue is fully consistent with CMS’ stated objectives. Response: We understand that interfacility cooperation and collaboration can indeed result in savings for the Medicare program, and we are committed to the specific goals of the CMMI and the Shared Savings Program. However, we do not agree that such positive objectives are applicable to the existing arrangements under which inpatients at one hospital effectively become inpatients at another hospital for as long a time as necessary, without having been discharged from the first hospital and admitted to the second. Comment: Most commenters requested that CMS, if it finalizes the proposed policy, adopt a grandfathering provision to allow hospitals that have been furnishing routine services under arrangements outside of the hospital to continue furnishing these services in this manner. Commenters stated that this policy would place significant administrative burdens on these hospitals, would be more expensive to the Medicare program, would be inconvenient and disruptive to patients, and would inappropriately inflate readmission rates under the Hospital Readmissions Reduction Program. Response: We do not believe it is appropriate to adopt a grandfathering provision. As noted above, we are concerned that, without this policy change, Medicare will continue to pay inappropriately for these services. That is, payment to IPPS hospitals should be based on the DRG payment amount, and payment to excluded hospitals should not be based in part on the costs of routine services that the hospital has not furnished directly to its patients. We do not believe that our proposal would be disruptive or inconvenient to patients; it does not prevent hospitals from transferring patients to another VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 facility to receive necessary services that the transferring hospital cannot provide. We recognize that, for a few providers, this policy will require the hospital to discharge its patients to the other hospital that will provide the routine/ICU services. However, this is necessary in order to be consistent with our current reading of section 1861(b) of the Act. We do not believe that a hospital’s readmission rates under the Hospital Readmissions Reduction Program would be affected by this policy because transfers to other providers are not included in the calculations of excess readmissions. Each of the measures of readmissions used in the Hospital Readmissions Reduction Program has exclusions for transfers to other hospitals. We discuss these exclusions in section IV.C. of this preamble. After consideration of the public comments and for the reasons set forth above, we are finalizing our proposal. Therefore, effective for services provided on or after October 1, 2011, if routine services are provided in the hospital to its inpatients, these services are considered as being provided by the hospital. However, if services are provided outside the hospital, the services are considered as being provided under arrangement. Only therapeutic and diagnostic items and services may be furnished under arrangement outside of the hospital. R. Finalization of Interim Final Rule With Comment Period on Revisions to the Reduction and Increases to Hospitals FTE Resident Caps for Graduate Medical Education Payment Purposes On March 14, 2011, we issued in the Federal Register (76 FR 13515) an interim final rule with comment period that implemented section 203 of the Medicare and Medicaid Extenders Act of 2010 relating to the treatment of teaching hospitals that are members of the same Medicare graduate medical education affiliated groups for the purpose of determining possible fulltime equivalent (FTE) resident cap reductions. In this final rule, we are restating a majority of the provisions of the interim final rule with comment period, responding to the public comments we received, and stating our final policy. 1. Background and Provisions of the Interim Final Rule With Comment Period a. Statutory Authority Section 1886(h) of the Act, as added by section 9202 of the Consolidated PO 00000 Frm 00240 Fmt 4701 Sfmt 4700 Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 99–272) and as currently implemented in the regulations at 42 CFR 413.75 through 413.83, establishes a methodology for determining payments to hospitals for the direct costs of approved graduate medical education (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 in 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, October 1, 1983 through September 30, 1984). The base year PRA is updated annually for inflation. In general, Medicare direct GME payments are calculated by multiplying the hospital’s updated PRA by the weighted number of full-time equivalent (FTE) residents working in all areas of the hospital complex (and at nonprovider sites, when applicable), and the hospital’s Medicare share of total inpatient days. Section 1886(d)(5)(B) of the Act provides for an additional payment amount under the hospital inpatient prospective payment system (IPPS) for hospitals that have residents in an approved GME program in order to account for 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 42 CFR 412.105. The hospital’s IME adjustment applied to the DRG payments is calculated based on the ratio of the hospital’s number of FTE residents training in either the inpatient or outpatient departments of the IPPS hospital to the number of inpatient hospital beds. The Balanced Budget Act of 1997 (Pub. L. 105–33) established a limit on the number of allopathic and osteopathic residents that a hospital may include in its 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 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 discharges occurring on or after October 1, 1997. The Affordable Care Act made a number of statutory changes relating to the determination of a hospital’s FTE resident count for direct GME and IME payment purposes and the manner in which FTE resident limits are calculated and applied to hospitals under certain circumstances. Section 5503 of the Affordable Care Act added a new section 1886(h)(8) to the Act to provide for the reduction in FTE resident caps for direct GME under Medicare for certain hospitals, and to authorize the ‘‘redistribution’’ of the estimated number of FTE resident slots to other qualified hospitals. In addition, section 5503 amended section 1886(d)(5)(B)(v) of the Act to require the application of section 1886(h)(8) of the Act provisions ‘‘in the same manner’’ as the FTE resident caps for IME. The regulations implementing section 5503 of the Affordable Care Act were included in the Hospital Outpatient Prospective Payment System final rule with comment period, published on November 24, 2010 in the Federal Register (75 FR 72147). Section IV.R.1.b. of this final rule summarizes the provisions of section 5503 of the Affordable Care Act as implemented in the November 24, 2010 Federal Register. b. Reductions and Increases to Hospitals’ FTE Resident Caps for GME Payment Purposes Under Section 5503 of the Affordable Care Act As previously discussed, the calculation of both direct GME and IME payments is affected by the number of FTE residents that a hospital is allowed to count; generally, the greater the number of FTE residents a hospital counts, the greater the amount of Medicare direct GME and IME payments the hospital will receive. In an attempt to end the implicit incentive for hospitals to increase the number of FTE residents, Congress instituted a cap on the number of allopathic and osteopathic residents a hospital is allowed to count for direct GME and IME purposes. Dental and podiatric residents are not included in this statutorily mandated cap. Some hospitals have trained a number of allopathic and osteopathic residents in excess of their FTE resident caps, while other hospitals have reduced their FTE resident counts to some level below their FTE resident caps. Section 5503 of the Affordable Care Act added a new section 1886(h)(8) to the Act to provide for reductions in the statutory FTE resident caps for direct GME under Medicare for certain hospitals, and VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 authorizes a ‘‘redistribution’’ to hospitals of the estimated number of FTE resident slots resulting from the reductions. Section 5503 of the Affordable Care Act also amended section 1886(d)(5)(B)(v) of the Act to require application of the provisions of section 1886(h)(8) of the Act ‘‘in the same manner’’ to the FTE resident caps for IME. Section 1886(h)(8)(A) of the Act provides that, effective for portions of cost reporting periods occurring on or after July 1, 2011, a hospital’s FTE resident cap will be reduced if its ‘‘reference resident level’’ is less than its ‘‘otherwise applicable resident limit,’’ as these terms are described below. Section 1886(h)(8)(A)(ii) of the Act and the November 24, 2010 Federal Register (75 FR 72147) describes which hospitals are exempt from a cap reduction under section 5503 of the Affordable Care Act. Included in that group are rural hospitals with fewer than 250 acute care inpatient beds. For other hospitals, any such reduction will be equal to 65 percent of the difference between the hospital’s ‘‘otherwise applicable resident limit’’ and its ‘‘reference resident level.’’ Under section 1886(h)(8)(B) of the Act, the Secretary is authorized to increase the FTE resident caps for certain categories of hospitals for portions of cost reporting periods occurring on or after July 1, 2011, by an aggregate number that does not exceed the estimated overall reduction in FTE resident caps for all hospitals under section 1886(h)(8)(A) of the Act. A single hospital may receive an increase in its FTE resident cap of no more than 75 additional FTEs. That is, a hospital is allowed to receive up to 75 additional slots for direct GME and up to 75 additional slots for IME. In determining which hospitals will receive an increase in their FTE resident caps, sections 1886(h)(8)(C) through 1886(h)(8)(E) of the Act directs us to do all of the following: • Take into account the demonstrated likelihood of the hospital filling the additional positions within the first three cost reporting periods beginning on or after July 1, 2011. • Take into account whether the hospital has an accredited rural training track program. • Distribute 70 percent of the resident slots to hospitals located in States with resident-to-population ratios in the lowest quartile. • Distribute 30 percent of the resident slots to hospitals located in a State, a territory of the United States, or the District of Columbia that are among the top 10 States, territories, or the District PO 00000 Frm 00241 Fmt 4701 Sfmt 4700 51715 in terms of the ratio of the total population living in an area designated as a health professional shortage area (HSPA), as of March 23, 2010, to the total population, and/or to hospitals located in rural areas. A comprehensive description of the rules implementing the cap slot redistribution under section 1886(h)(8) of the Act can be found in the November 24, 2010 Federal Register (75 FR 72168). c. Treatment of Affiliated Groups Under Section 5503 of the Affordable Care Act A previous redistribution of ‘‘unused’’ FTE resident slots was performed in 2005 under section 422 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) (Pub. L. 108–173). Section 422 of the MMA provided for the redistribution of unused residency positions effective for portions of cost reporting periods beginning on or after July 1, 2005. While the redistribution under section 5503 of the Affordable Care Act as initially enacted is similar to the previous redistribution under section 422 of MMA, there are substantive differences between the two provisions. One of those differences involves the treatment of hospitals that were members of the same Medicare GME affiliated groups for purposes of determining whether a hospital should receive a cap reduction. The regulations governing Medicare GME affiliated groups and Medicare GME affiliation agreements are at 42 CFR 413.75(b) and 413.79(f), respectively. Medicare GME affiliation agreements allow teaching hospitals to temporarily transfer cap slots to other hospitals in order to facilitate the crosstraining of residents. The duration of the temporary cap slots transfer is a minimum of 1 year beginning on July 1 of a year, per the Medicare GME affiliation agreement. Under section 422 of MMA, the statute explicitly directed the Secretary to apply the provisions to hospitals that were members of the same Medicare GME affiliated group as of July 1, 2003. Specifically, section 1886(h)(7)(A)(iii) of the Act states ‘‘The provisions of clause (i) shall be applied to hospitals which are members of the same Medicare GME affiliated group (as defined by the Secretary under paragraph (4)(H)(ii)) as of July 1, 2003.’’ Therefore, in implementing section 422 of MMA, we based the FTE resident cap reductions for hospitals that were participating in a Medicare GME affiliated group on the aggregate cap and count data from all hospitals participating in the same Medicare GME affiliated group(s). If a hospital was training a number of E:\FR\FM\18AUR2.SGM 18AUR2 51716 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 residents below its FTE resident cap for the reference cost reporting period but the hospital was part of a Medicare GME affiliated group for some or all of that reference cost reporting period, the Medicare contractor determined if the aggregate affiliated count for all hospitals in the Medicare GME affiliated group was greater than the aggregate affiliated cap. If the aggregate affiliated count was greater than the aggregate cap, then there was no reduction made to the FTE caps of any hospital in the Medicare GME affiliated group (even for the hospital that was part of the Medicare GME affiliated group, but was training below its cap). However, as we noted in the November 24, 2010 Federal Register (75 FR 72161), in contrast to section 422 of MMA, section 5503 of the Affordable Care Act as initially enacted did not include language specific to Medicare GME affiliated groups as was included in section 422 of MMA under section 1886(h)(7)(A)(iii) of the Act. Thus, section 5503 of the Affordable Care Act as initially enacted did not provide for determinations based on the aggregate experience of a Medicare GME affiliated group. Therefore, we stated in the November 24, 2010 Federal Register (75 FR 72161), that the determination of whether a hospital would receive a cap reduction based on that individual hospital’s experience and not the aggregate experience of the Medicare GME affiliated group. d. Section 203 of the Medicare and Medicaid Extenders Act of 2010 (Pub. L. 111–309) Section 203 of the Medicare and Medicaid Extenders Act of 2010 (MMEA) further amended section 1886(h)(8) of the Act by adding a new subparagraph (I) which reads: ‘‘(I) Affiliation.—The provisions of this paragraph shall be applied to hospitals which are members of the same affiliated group (as defined by the Secretary under paragraph (4)(H)(ii)) and the reference resident level for each such hospital shall be the reference resident level with respect to the cost reporting period that results in the smallest difference between the reference resident level and the otherwise applicable resident limit.’’ This subparagraph refers to the treatment of hospitals that are members of the same Medicare GME affiliated groups, as described in section IV.R.1.c. of this final rule for purposes of determining a hospital’s possible cap reductions under section 1886(h)(8)(A) of the Act. Similar to section 422 of MMA, this amendment to the language at section 1886(h)(8) of the Act allows VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 us to consider hospitals that are members of the same Medicare GME affiliated group in the aggregate, rather than only on an individual basis, for the purposes of determining a GME FTE cap reduction. Although this amendment allows us to implement section 5503 of the Affordable Care Act in a manner similar to section 422 of MMA, a key difference in implementation remains. One point of note is that section 422 of MMA (section 1886(h)(7)(A)(ii)(I) of the Act) refers to the most recent cost reporting period ending on or before September 30, 2002, as the reference cost reporting period. However, as stated in the August 11, 2004 Federal Register (69 FR 49125), if a hospital was a member of a Medicare GME affiliated group for the academic year beginning July 1, 2003, its reference cost reporting period was the cost reporting period that included July 1, 2003. This differs from section 5503 of the Affordable Care Act, which instructs the Secretary to choose the reference cost reporting period out of the hospital’s three most recent cost reporting periods ending before March 23, 2010, for which a cost report has been settled or has been submitted to the Medicare contractor by March 23, 2010, that has the highest FTE resident count (section 1886(h)(8)(H)(i) of the Act). For hospitals that were members of the same Medicare GME affiliated groups, the MMEA now allows us to determine the reference cost reporting period as the cost reporting period out of the hospitals three most recent cost reporting periods ending before March 23, 2010, for which a cost report has been settled or has been submitted to the Medicare contractor by March 23, 2010, with the smallest difference between the reference resident level and the otherwise applicable resident limit (section 1886)(h)(8)(I) of the Act). Therefore, based on the amendment made to section 1886(h)(8) of the Act by section 203 of the MMEA of adding subparagraph (I), in the interim final rule with comment period, we established a methodology to determine whether a hospital is subject to a cap reduction under section 5503 of the Affordable Care Act based on that hospital’s participation in a Medicare GME affiliated group(s) or an emergency Medicare GME affiliated group under 42 CFR 413.79(f). Although the MMEA provision applies to both regular Medicare GME affiliation agreements and emergency Medicare GME affiliation agreements, for ease of reference, we refer in this discussion to both with the phrase ‘‘Medicare GME affiliation agreements.’’ We believe that PO 00000 Frm 00242 Fmt 4701 Sfmt 4700 the purpose of section 203 of MMEA is to amend section 1886(h)(8) of the Act in order to implement section 5503 of the Affordable Care Act in a manner that is similar to section 422 of MMA with regard to treatment of hospitals that are members of the same Medicare GME affiliated group. Accordingly, we are implementing section 203 of the MMEA in a manner similar to the way in which section 422 of MMA was implemented. The methodology used to determine a cap reduction for hospitals that are members of the same affiliated group is as follows: Part 1: Determine the ‘‘Reference Cost Reporting Period’’ The Medicare contractor will assess each hospital on an individual basis. First, the Medicare contractor will determine whether a hospital was a member of a Medicare GME affiliated group at any point during any of the hospital’s three most recent cost reporting periods ending before March 23, 2010, for which a cost report has been settled or has been submitted to the Medicare contractor by March 23, 2010. That is, the Medicare contractor will determine whether the caps during any of those three cost reporting periods were revised because the hospital was a member of a Medicare affiliation agreement. If a hospital was not a member of a Medicare GME affiliated group during any of those three cost reporting periods, the Medicare contractor will determine if and by how much that hospital’s FTE resident caps should be reduced in accordance with the policy established in the November 24, 2010 final rule (75 FR 72155 through 72168). If the Medicare contractor determines that a hospital was a member of a Medicare GME affiliated group at any point during any of the three most recent cost reporting periods ending before March 23, 2010 for which a cost report has been settled or has been submitted to the Medicare contractor by March 23, 2010, subparagraph (I) of section 1886(h)(8) of the Act applies, and the Medicare contractor will determine a hospital’s reference cost reporting period by determining the cost reporting period from the three most recent cost reporting periods ending before March 23, 2010, for which a cost report has been settled or has been submitted to the Medicare contractor by March 23, 2010, that results in the smallest difference between the reference resident level and the otherwise applicable resident limit. For example, a hospital with a FYE of December 31 may not be a member of a Medicare GME affiliated group for the E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations academic years beginning July 1, 2006, 2007, or 2008, but it may be a member of a Medicare GME affiliated group for the academic year beginning July 1, 2005. In the cost reporting period ending December 31, 2006, the months of January through June 2006 would be affected by the July 1, 2005 Medicare GME affiliation agreement. Therefore, in this example, the hospital is indeed a member of a Medicare GME affiliated group at some point, albeit for only a portion of a cost reporting period, during its three most recent cost reporting periods ending before March 23, 2010, for which a cost report has been settled or has been submitted to the Medicare contractor by March 23, 2010 (in this case, these cost reporting periods would include FYE December 31, 2008, FYE December 31, 2007, and FYE December 31, 2006), and as such its reference cost reporting period would be determined as the cost reporting period that results in the smallest difference between the reference resident level and the otherwise applicable resident limit. As previously discussed, section 422 of the MMA specified a single time period that would be used for all hospitals that were members of a Medicare GME affiliated group; that is as of July 1, 2003. However, section 5503 of the Affordable Care Act does not specify one cost reporting period, but rather it specifies that the reference cost reporting period is one out of three possible cost reporting periods. For a hospital that was a member of a Medicare GME affiliated group at any point during any of the three applicable cost reporting periods, after determining the cost report that is a hospital’s reference cost reporting period based on the cost report that results in the smallest difference between the reference resident level and the otherwise applicable resident limit, to determine whether there are any excess slots we believe it is appropriate to consider whether a hospital was a member of a Medicare GME affiliated group as of July 1 of that reference cost reporting period. The hospital may or may not have been a member of a Medicare GME affiliated group during that reference cost reporting period. We do not believe that section 1886(h)(8)(I) of the Act, as added by section 203 of the MMEA, requires that a hospital must be a member of a Medicare GME affiliated group during all 3 cost reporting periods, nor during the year determined to be the reference cost reporting period. Rather, being a member of a Medicare GME affiliated group at some point in only one of the three cost reporting periods warrants VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 that a hospital’s reference cost reporting period be determined based on which cost report has the smallest difference between the reference resident level and the otherwise applicable resident limit. To determine if an FTE resident cap reduction is appropriate, if the hospital was a member of a Medicare GME affiliated group as of July 1 in the reference cost reporting period, we will look at the Medicare GME affiliated group in the aggregate, when we determine if the subject hospital has excess capacity for purposes of a reduction under sections 5503 and 203. If the hospital was not a member of a Medicare GME affiliated group as of July 1 in the reference cost reporting period, excess FTEs training at other members of the affiliated group will not be considered for the purposes of a reduction under sections 5503 and 203 and that hospital’s FTE resident caps should be reduced in accordance with the policy established for hospitals that are not members of Medicare GME affiliated groups in the November 24, 2010 final rule (75 FR 72155 through 72168). The nature of this determination underscores the fact that reductions to the FTE resident caps of hospitals that are members of Medicare GME affiliated groups must still be made on an individual hospital basis. The following is an example of a reference cost reporting period determination. (For ease of illustration, this example focuses on reductions to the IME FTE resident caps only, but the methodology is the same for reductions to the direct GME FTE resident caps): Hospital A has a FTE resident cap of 10 FTE residents. Hospital A’s three most recent cost reports that have been settled or submitted to the Medicare contractor by March 23, 2010 include cost reporting periods with FYE 12/31/ 2006, 12/31/2007, and 12/31/2008. During these three cost reporting periods, Hospital A trained 8, 9, and 9 FTE residents, respectively. For the academic years beginning July 1, 2006 and July 1, 2007, Hospital A was not a member of a Medicare GME affiliated group. However, for the academic year beginning July 1, 2008, Hospital A is affiliated with Hospital B and Hospital C. As a result of its Medicare GME affiliation agreement with Hospitals B and C, Hospital A’s adjusted cap or otherwise applicable resident limit is 12 for the academic year beginning July 1, 2008. Thus, when determining the reference cost reporting period for Hospital A, the Medicare contractor would compare the resident level for Hospital A with its otherwise applicable PO 00000 Frm 00243 Fmt 4701 Sfmt 4700 51717 resident limit for each of the cost reporting period as indicated below: • Cost Reporting Period 1 (01/01/2006– 12/31/2006): 10 (FTE Resident Cap)— 8 (FTE Resident Count) = 2 • Cost Reporting Period 2 (01/01/2007– 12/31/2007): 10 (FTE Resident Cap)— 9 (FTE Resident Count) = 1 • Cost Reporting Period 3 (01/01/2008– 12/31/2008): 11 (Adjusted FTE Resident Cap)—9 (FTE Resident Count) = 2 (Note that although Hospital A received an increase of 2 FTEs, from 10 to 12, under the Medicare GME affiliation agreement for the academic year beginning July 1, 2008, since Hospital A has a 12/31 fiscal year end, the actual cap adjustment is prorated to half of 2, for an increase to its FTE resident cap of 1, equaling 11). In this example, the smallest difference between the reference resident level and the otherwise applicable resident limit for Hospital A is 1, which occurs in the cost reporting period with FYE 12/31/2007. Thus, Hospital A’s reference cost reporting period is 01/01/2007–12/31/ 2007. Note that Hospital A is not a member of a Medicare GME affiliated group during FYE 12/31/07. The implications of this are discussed below. Part 2: Determine the Applicable Reductions For a hospital that was a member of a Medicare GME affiliated group at any point during any of its three most recent cost reporting periods ending before March 23, 2010, for which a cost report has been settled or has been submitted to the Medicare contractor by March 23, 2010, once the Medicare contractor determines that hospital’s reference cost reporting period (that is, the cost report with the smallest difference between the hospital’s FTE resident cap and FTE resident count), the Medicare contractor must then determine if the hospital was a member of a Medicare GME affiliated group as of the July 1 that occurs during that reference cost reporting period. If not, and the hospital’s FTE resident count was equal to or exceeded its FTE resident cap in that reference cost report, no reduction to its FTE resident cap is made and no further steps are necessary. If that hospital’s FTE resident count was less than its FTE resident cap during that reference cost report, then the Medicare contractor would reduce the FTE resident cap by 65 percent of the difference between the FTE resident cap and the FTE resident count. If the hospital was a member of a Medicare GME affiliated group as of the July 1 that occurs during that reference E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51718 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations cost reporting period, the Medicare contractor will look at the members of the Medicare GME affiliated group for that period in the aggregate, for the purpose of determining a reduction to the particular hospital’s FTE resident cap. In other words, assuming the Medicare contractor is assessing Hospital X, once it is determined that Hospital X was training residents below its adjusted FTE resident cap as part of a Medicare GME affiliation agreement occurring during Hospital X’s reference cost reporting period, the Medicare contractor will treat the hospitals in the Medicare GME affiliated group in the aggregate, but only for the purpose of determining the reduction to Hospital X’s FTE resident cap. The Medicare contractor will not actually reduce the FTE resident caps of the other hospitals that were affiliated with Hospital X in that year because each hospital is evaluated separately, and it may be that the reference cost reporting periods for the other hospitals may not be the same as Hospital X’s reference cost reporting period. (It may be that the reference cost reporting period for another hospital is one in which that hospital was not part of a Medicare GME affiliated group, in which case, treatment as a group is not warranted when determining that hospital’s FTE cap reduction). For the hospital that was a member of a Medicare GME affiliated group as of the July 1 that occurs during that reference cost report, the Medicare contractor will determine for each hospital in the Medicare GME affiliated group respectively its FTE resident cap and FTE resident count (IME and direct GME separately). The Medicare contractor will add each hospital’s FTE resident caps (IME and direct GME separately) to determine the aggregate affiliated FTE resident cap. The contractor will then add each hospital’s FTE resident count (IME and direct GME separately) to determine the aggregate affiliated FTE resident count. If the aggregate FTE resident counts are equal to or exceed the aggregate FTE resident caps, no reductions would be made to that particular hospital’s FTE resident cap under section 5503 of Affordable Care Act, and no further steps are necessary for that hospital. We emphasize that at this point, the contractor has only determined that the particular hospital will not be subject to an FTE resident cap reduction—as the FTE resident cap reduction determination is ultimately one that is done on an individual hospital basis, at this point the contractor has not made any determinations regarding the status of the other hospitals that are in the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 same Medicare GME affiliated group as the particular hospital under review. However, where the aggregate FTE resident count is below the aggregate FTE resident cap (IME and direct GME separately), a reduction to the particular hospital’s FTE resident cap would be necessary. In these cases, for each hospital that is a member of the same Medicare GME affiliated group, the Medicare contractor will determine the following FTE information from the cost report that includes July 1 of the particular hospital’s reference cost reporting period: (1) The ‘‘1996’’ FTE resident cap (as adjusted by new programs, if applicable) for the hospital under review—For IME, from Worksheet E, Part A of the Medicare cost report, the sum of lines 3.04 and 3.05. If the hospital’s IME FTE resident cap was reduced under section 422 of the MMA, subtract from this sum the amount reported on Worksheet E–3, Part VI, line 13. For direct GME from Worksheet E–3, Part IV of the Medicare cost report, the sum of lines 3.01 and 3.02. If the hospital’s direct GME FTE resident cap was reduced under section 422 of the MMA, subtract from this sum the amount reported on Worksheet E–3, Part VI, line 2. (2) The ‘‘affiliated’’ FTE resident cap for the hospital under review assessed— For IME, line 3.07; and for direct GME, line 3.04. (3) The total number of allopathic and osteopathic FTE residents for the hospital under review—For IME, line 3.08; for direct GME, line 3.05. (4) The difference between the aggregate ‘‘affiliated’’ FTE resident cap and the total FTE resident counts for all of the affiliated hospitals—For IME, è line 3.08 minus è (lines 3.04 + 3.05— applicable section 422 reduction amount); and for direct GME, è line 3.05 minus è (lines 3.01 + 3.02— applicable section 422 reduction amount). (5) For IME, for those hospitals whose FTE resident count from line 3.08 is greater than the ‘‘affiliated’’ FTE resident cap on line 3.07, indicate ‘‘zero.’’ For direct GME, for those hospitals whose FTE resident count from line 3.05 is greater than the ‘‘affiliated’’ FTE resident cap on line 3.04, indicate ‘‘zero.’’ For IME, for those hospitals whose FTE resident count from line 3.08 is less than the ‘‘affiliated’’ FTE resident cap on line 3.07, determine the difference between the hospital’s ‘‘affiliated’’ FTE resident cap and the hospital’s FTE resident count, line 3.08 minus line 3.07. For direct GME, for those hospitals whose FTE resident count from line 3.05 is less than the ‘‘affiliated’’ FTE resident cap on line 3.04, determine the difference PO 00000 Frm 00244 Fmt 4701 Sfmt 4700 between the hospital’s ‘‘affiliated’’ FTE resident cap and the hospital’s FTE resident count, line 3.05 minus line 3.04. (6) For IME and direct GME separately, to determine the total amount by which the FTE resident counts are below the ‘‘affiliated’’ FTE resident caps, add the amounts determined under step 5 for all hospitals that trained fewer residents than its ‘‘affiliated’’ FTE resident caps. (7) For IME and direct GME separately, determine a pro rata cap reduction for the hospital under review by dividing the hospital’s specific amount in step 5 by the total amount for all of those hospitals in step 6, and multiply by the amount in step 4 (that is, (step 5/step 6) × step 4). (8) For IME and direct GME separately, determine the actual cap reduction for the hospital under review by multiplying the pro rata cap reduction from step 7 by 0.65. (9) For IME and direct GME separately, determine the reduced FTE resident cap for the hospital under review by subtracting the actual cap reduction from step 8 from the ‘‘1996’’ FTE resident cap from step 1. This is the hospital’s FTE resident cap effective July 1, 2011. The following is an example of how the reductions to the FTE resident caps will be determined where the FTE resident counts in the aggregate for hospitals that were affiliated as of July 1 of the reference cost reporting period for a particular hospital are below the hospitals’ FTE resident caps in the aggregate. For ease of illustration, this example focuses on reductions to the IME caps only, but the methodology is the same for reductions to the direct GME caps. In this example, the Medicare contractor has determined, using the methodology from Step 1, that the reference cost reporting period (the period with smallest difference between the reference resident level and the otherwise applicable resident limit) for Hospital D is January 1, 2007 to December 31, 2007. The academic year that occurs in this reference cost reporting period begins July 1, 2007. Hospitals D, E, and F are members of a Medicare GME affiliated group for the academic year that begins July 1, 2007. Hospital D is also separately affiliated with Hospitals G and H for the academic year that begins July 1, 2007. Thus, the affiliated group for GME payment purposes, and for purposes of determining possible FTE cap reductions for Hospital D under subparagraph (I) consists of Hospitals D, E, F, G, and H. Hospital E’s cost report E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 51719 FYE December 31, 2007, and Hospital H’s cost report that includes July 1, 2007 is its FYE September 30, 2007. Using steps 1 through 9 above, the reduction to the FTE resident caps for Hospital D is determined in the table below. In this example, Hospital D’s FTE resident count of 75 was 15 less than its ‘‘affiliated’’ FTE resident cap of 90, and Hospital H’s FTE resident count of 65 was 60 less than its ‘‘affiliated’’ FTE resident cap of 125 (as determined under step 5). Hospital F’s ‘‘affiliated’’ FTE resident cap equaled its FTE resident count. Under this methodology, the fact that Hospitals E and G exceeded their respective ‘‘affiliated’’ FTE resident caps minimizes the reductions to Hospital D’s ‘‘1996’’ FTE resident caps through the calculation of a pro rata reduction under step 7. We note that although Hospital H is also under its cap; its cap is not reduced in this exercise. Under section 5503, the cap reduction determination is calculated individually for each hospital based on its individual reference cost reporting period, so each hospital would be evaluated for a possible reduction separately. Hospital H will be evaluated separately, and it may be that Hospital H’s reference cost report may not be its FYE September 30, 2007 cost report, and ultimately, Hospital H may or may not be subject to an FTE resident cap reduction. Thus, under step 8, the actual cap reduction of 5.2 FTEs for Hospital D is determined by taking 65 percent of 8 (rather than 65 percent of 15). As a result, under step 9, Hospital D’s final FTE resident cap effective on July 1, 2011 is determined to be 109.8 FTEs. We also note that the reduction to Hospital D’s ‘‘1996’’ FTE resident caps was minimized only because Hospitals E and G exceeded their ‘‘affiliated’’ FTE resident caps. If all hospitals in the Medicare GME affiliated group had trained residents below their ‘‘affiliated’’ FTE resident caps, a pro rata reduction would not benefit Hospital D. In that case, the ‘‘1996’’ FTE resident caps of Hospital D in the Medicare GME affiliated group would be reduced by 65 percent of the difference between its ‘‘affiliated’’ FTE resident cap and FTE resident count. We believe this final policy is similar to the method used to implement section 422 of the MMA with regard to hospitals that were members of the same Medicare GME affiliated group in that, as under section 422 of the MMA, we are only treating a hospital as part of a group if the hospital was a member of a Medicare GME affiliation agreement during its reference cost reporting period under section 1886(h)(8) of the Act. In implementing section 203 of the MMEA in this manner, we believe we have addressed the concerns raised by commenters in response to the August 3, 2010 proposed rule (75 FR 46395) in that this policy could protect hospitals from a loss of slots if the aggregate counts equal to or exceed the ‘‘affiliated’’’ FTE resident caps, and could limit the loss of slots in the instance where a hospital is a member of a Medicare GME affiliated group and the aggregate counts are below the ‘‘affiliated’’ FTE resident caps. authorizes a ‘‘redistribution’’ to hospitals of the estimated number of FTE resident slots resulting from the reductions. Section 5503 of the Affordable Care Act also amended section 1886(d)(5)(B)(v) of the Act to require application of the provisions of section 1886(h)(8) of the Act ‘‘in the same manner’’ to the FTE resident caps for IME. Section 1886(h)(8) of the Act requires that any such reduction to the FTE resident caps will be equal to 65 percent of the difference between the hospital’s ‘‘otherwise applicable resident limit’’ and its ‘‘reference resident level.’’ Section 5503 of the Affordable Care Act as initially enacted did not include language specific to Medicare GME affiliated groups and did not provide for FTE resident cap reduction determinations based on the aggregate experience of a Medicare GME affiliated group. Accordingly, section 203 of the MMEA further amended section 1886(h)(8) of the Act to specify that the provisions of section 1886(h)(8) of the Act shall be applied to hospitals which are members of the same Medicare GME affiliated group, and the ‘‘reference resident level’’ for each such hospital is the FTE resident count from the cost reporting period that results in the smallest difference between the FTE resident count and the FTE resident cap. In the March 14, 2011 interim final rule with comment period, we implemented section 203 of the MMEA relating to the treatment of teaching hospitals that are members of the same Medicare graduate medical education affiliated groups for the purpose of determining possible full-time equivalent resident cap reductions. We also revised § 413.79(m)(7) of our regulations to VerDate Mar<15>2010 19:46 Aug 17, 2011 Jkt 223001 2. Summary of the Provisions of the Interim Final Rule With Comment Period As stated earlier, in the final rule published in the November 24, 2010 Federal Register (75 FR 71800), we implemented section 5503 of the Affordable Care Act, which added a new section 1886(h)(8) to the Act. Section 5503 of the Affordable Care Act provides for reductions in the statutory FTE resident caps for direct GME under Medicare for certain hospitals, and PO 00000 Frm 00245 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.018</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 that includes July 1, 2007 is FYE June 30, 2008. Hospital D’s, F’s, and G’s cost report that includes July 1, 2007 is their 51720 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations reflect the changes made by section 203 of the MMEA. 3. Summary of Public Comments, Departmental Responses, and Statements of Final Policies mstockstill on DSK4VPTVN1PROD with RULES2 a. Summary of Public Comments and Departmental Responses Comment: Several commenters supported CMS’ interpretation and implementation of section 203 of the MMEA. One commenter believed that CMS has ‘‘very reasonably’’ addressed a complex issue, considering that the Affordable Care Act requires that multiple cost reporting periods be referenced to determine possible cap reductions, and the MMEA’s intent that CMS consider affiliated group participation in deciding the appropriate level of cap reductions. Commenters stated that they recognized the challenges and complexities of the implementation of section 203 of the MMEA, but that CMS’ methodology is reasonable. Given the complexities of implementation, commenters urged CMS to review public comments received on the interim final rule with comment period very carefully and make modifications if necessary. Response: We appreciate the commenters’ support and recognition of our efforts to develop a process that is as fair, reasonable, and intuitive as possible within the statutory guidelines for determining if and by how much the FTE resident caps of hospitals that were members of Medicare GME affiliated groups will be reduced. Likewise, we have made sure that we applied deliberate, thoughtful, and equitable treatment in reviewing and responding to public comments we received on the interim final rule with comment period. Comment: Commenters suggested that CMS test its methodology for validity because it is difficult to assess such a national policy on hospital-specific reductions. Commenters asked CMS to compare the sum of the cap reductions that result from the methodology in the interim final rule with comment period to the result that would have occurred in the absence of the interim final rule with comment period in order to avoid inappropriate results. Moreover, commenters stated that these checks should be performed for each affiliated group, and for each individual hospital, to ensure that all reductions are not counterintuitive, or that a hospital would not be getting a greater reduction under application of the MMEA methodology, than in the absence of being treated as part of an affiliated group. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 One commenter stated that it did not believe it was the expectation of Congress that the inclusion of section 203 within the MMEA would result in only minor changes in the overall results of the reduction determinations made under section 5503 of the Affordable Care Act. Thus, this commenter believed that CMS should implement a ‘‘global check’’ to ensure that the resulting reductions applied to all affiliated groups sum to significantly less than would have been the case absent the application of this methodology. Response: As the commenters have already acknowledged, it was difficult to devise a methodology for applying a pro rata reduction to the FTE resident caps of hospitals that were in Medicare GME affiliated groups during their reference cost reporting period. This is because we had to examine FTE resident caps and counts over a 3-year period, not under a single one as under section 422 of the MMA, and account for the fact that, for hospitals in Medicare GME affiliated groups, FTE resident caps and counts could vary over those 3-year periods. Determining if and when to apply section 203 of the MMEA at the individual hospital level or at the affiliated group level was somewhat challenging. Nevertheless, given the fluid dynamics of Medicare GME Affiliated groups that result from sharing FTE resident caps and resident rotations, we understood that under any mathematical formula that could be applied, there could be the potential for unexpected results and unintended consequences. In recognition of this challenge, we, in conjunction with the Medicare contractors, made sure that in each instance that the pro rata reduction was applied, the FTE resident cap reduction to an affiliated hospital was less than the reduction that it would have received in the absence of the section 203 of the MMEA and being treated as part of a Medicare GME affiliated group. In other words, in all cases, we made sure that each affiliated group and each hospital only benefited from treatment as a group. Furthermore, we also ensured that if an FTE resident cap reduction was warranted at the individual hospital level, no other hospital in the affiliated group was negatively impacted by the pro rata reduction that occurred to an individual hospital. That is, because, as we explained in the interim final rule with comment period (76 FR 13518 and 13519), the Medicare contractor was to assess each hospital and ultimately make an FTE resident cap reduction on an individual basis, other hospitals in PO 00000 Frm 00246 Fmt 4701 Sfmt 4700 the Medicare GME affiliated group whose FTE resident counts exceeded their applicable FTE resident caps during their reference cost reporting periods would not be receiving FTE cap reductions, and would not be impacted. Comment: One commenter asked CMS to clarify the impact on the redistribution of ‘‘unused’’ IME cap slots when a Medicare GME affiliated group includes a hospital that reports and receives only direct GME reimbursement (for example, a children’s or cancer hospital). The commenter stated that because the residents would likely qualify for IME payments at an IPPS hospital, it would seem inappropriate to reduce the aggregate IME cap of the affiliated group simply because IME slots were being used by a non-IME hospital. (The commenter also noted that, with regard to HRSA’s Children’s GME Payment Program (CHGME), HRSA advised children’s hospitals receiving cap slots under a Medicare GME Affiliation Agreement with an IPPS hospital to share only the direct GME cap and not the IME cap.) Response: Because children’s hospitals are excluded from payment under the IPPS under section 1886(d) of the Act, they do not receive IME payment and they do not have IME FTE caps for Medicare purposes. ‘‘IME caps’’ that have been assigned to children’s hospitals under HRSA’s CHGME program have no bearing on Medicare payment. Children’s hospitals with approved medical residency training programs only receive direct GME payments from Medicare and, therefore, only have direct GME FTE resident caps. Therefore, when a children’s hospital is part of a Medicare GME affiliation agreement with an IPPS hospital, while direct GME FTE resident cap slots may be transferred between the two facilities, the amount entered for the IME FTE resident cap slots should be ‘‘zero’’ or ‘‘not applicable.’’ (We note that the same is true for teaching IRFs or IPFs that affiliate with IPPS hospitals. The IME teaching adjustment under the IRF PPS and the IPF PPS has no bearing on the IPPS, and should not be reflected in Medicare GME affiliation agreements). We disagree with the commenter who believed that we are reducing the aggregate IME cap of the affiliated group simply because IME slots are being used by a hospital that does not receive payment under the IPPS. Rather, we believe that under section 5503 of the Affordable Care Act, the FTE resident caps of hospitals, affiliated or not, are being reduced in the instance where there is excess capacity between the E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations hospital’s FTE resident cap and FTE resident count. If, under the Medicare GME affiliation agreement, an IPPS hospital sends FTE slots and residents to a children’s hospital, only direct GME FTE slots are being transferred. IME slots remain with the IPPS hospital, and if they are not actually being used by the IPPS hospital, there is excess IME capacity. Thus, if, in the Medicare GME affiliated group as a whole, the aggregate IME FTE resident cap exceeds the aggregate IME FTE resident count (that is, there is excess capacity), whether or not a children’s hospital is one of the hospitals in the affiliated group, one or more of the hospitals in that affiliated group will ultimately be subject to a reduction to its FTE resident cap. (Because a children’s hospital has no IME cap, it will obviously not be the hospital subject to the IME FTE resident cap reduction.) Comment: One commenter asked CMS to confirm that the ‘‘actual cap reduction’’ cannot exceed the ‘‘1996’’ FTE cap for a hospital that was a member of a Medicare GME affiliated group during their reference cost reporting period. Specially, the commenter asked for confirmation that a hospital with a ‘‘1996’’ FTE cap of zero would never have an FTE cap reduction. The commenter stated that they assumed no hospital would be assigned a negative ‘‘final FTE cap’’ effective July 1, 2011. Response: The commenter is correct that an FTE resident cap reduction under section 5503 of the Affordable Care Act, consistent with section 422 of the MMA, cannot exceed the amount in a hospital’s 1996 FTE resident cap (including applicable add-ons for new programs under § 413.79(e) of the regulations). Further, an FTE resident cap cannot be reduced below zero, nor would an FTE resident cap that is already zero be further reduced. Comment: Commenters reiterated that it is Congress’ position that only unused slots be removed from hospitals subject to section 5503 of the Affordable Care Act and, therefore, asked CMS to consider the most recent cost reporting data available, specifically from the academic year 2010, in the implementation of section 5503. These commenters asserted that section 203 of the MMEA applies to ‘‘hospitals which are members of the same affiliated group (emphasis added),’’ and that it is effective ‘‘as if included in the enactment of section 5503(a)’’ of the Affordable Care Act. The commenters stressed that the statute did not state that the provision pertains to ‘‘hospitals that were members of the same affiliated group.’’ The commenters argued that VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 ‘‘without explanation,’’ the interim final rule with comment period applies the protections of the MMEA only to those hospitals that were affiliated prior to the 2010 academic year, which is contrary to the plain reading of the statute. Rather, the commenters believed that a hospital that was in an affiliated group on the date the ACA was enacted is entitled to protection under the MMEA. Response: We disagree with the commenters that the plain reading of the statute requires that the protections of the MMEA regarding being a member of a Medicare GME affiliated group be applied to hospitals that ‘‘are’’ members of the same affiliated group ‘‘as of the date of enactment’’ (that is, March 23, 2010) because the MMEA is effective ‘‘as if included in the enactment of section 5503(a)’’ of the Affordable Care Act. Rather, we believe that the plain reading of the language that section 203 of the MMEA is effective ‘‘as if included in the enactment of section 5503(a)’’ of the Affordable Care Act means that (1) the provisions of section 5503 should be applied to affiliated hospitals (that is, consideration as a group should be given, not only at the individual hospital level), and (2) for these affiliated hospitals, the reference resident level for each such hospital shall be the reference resident level with respect to the cost reporting period that results in the smallest difference between the reference resident level and the otherwise applicable resident limit. Section 203 of the MMEA did not in any way make any changes to the Affordable Care Act timeframe of the reference cost reporting periods. Rather, section 203 of the MMEA only stated that, for a hospital that is part of a Medicare GME affiliated group, that reference period should be the one that results in the smallest difference between the FTE resident cap and the FTE resident count. As a result, even for hospitals that are affiliated, their reference cost reporting period would be chosen from the very same reference cost reporting periods as nonaffiliated hospitals; that is, any of the three most recent cost reporting periods ending before March 23, 2010, for which a cost report has been settled or has been submitted to the Medicare contractor by March 23, 2010. Therefore, the fact that a hospital was affiliated as of March 23, 2010, has no bearing on the choice of the reference cost reporting period. Because the MMEA did not revise the rule regarding the timeframe for the reference cost reporting periods, the hospital’s cost report for its academic year 2010 cannot be used as the hospital’s reference cost reporting period. PO 00000 Frm 00247 Fmt 4701 Sfmt 4700 51721 Comment: Commenters made the following suggestions on how CMS should properly implement section 203 of the MMEA: (1) Consistent with the method that CMS initially proposed for implementing the provision for affiliated hospitals under section 422 of the MMA, use the adjusted FTE cap from the Medicare GME affiliation agreement in effect for academic year 2010, while determining the FTE count from whichever cost reporting period CMS would otherwise use. (2) Use the adjusted FTE cap and the FTE count from a cost reporting period that at least partially overlaps academic year 2010. For a hospital with a December 31 fiscal year end, this period would be its fiscal year 2009 cost reporting period. The commenter also stated that where the adjusted FTE caps for those earlier periods is favorable to hospitals; it had no objection to CMS’ exercise of its discretion to use those earlier period adjusted FTE caps in its FTE cap reduction calculation. However, for hospitals that were in an affiliated group only in academic year 2010, the commenter asserted that the legislation requires that CMS take the corresponding agreement into account in its calculations. (3) Allow the hospital to show that it has slots approved within the past 3 years that remained unfilled, accounting for at least 5 percent of the hospital’s unadjusted 1996 FTE caps; (4) Consider whether the hospital has evidence of cross-training activities in years prior to academic year 2010. In the commenter’s case, the commenter alleged that two hospitals had been ‘‘training partners since 2006,’’ but as a result of a ‘‘mere oversight,’’ they had not entered into a Medicare GME affiliation agreement until July 1, 2009. The commenter asserted that ‘‘nothing about the joint training, however, could be characterized as a ‘rushed attempt to avoid a cap reduction.’ ’’ Response: In response to the commenters’ first recommendation, the portion of section 422 of the MMA that is relevant to hospitals that were part of a Medicare GME affiliated group is implemented at section 1886(h)(7)(A)(iii) of the Act, which states, ‘‘the provisions of clause (i) shall be applied to hospitals which are members of the same affiliated group * * * as of July 1, 2003.’’ As we explained in the August 11, 2004 final rule (69 FR 49126), ‘‘we proposed to interpret clause (i) to mean that the Secretary is to use a hospital’s July 1, 2003 ‘affiliated’ FTE resident cap as the otherwise applicable FTE resident cap when determining a possible reduction E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51722 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations to the FTE resident cap. In other words, if a hospital is affiliated as of July 1, 2003, we proposed to superimpose the ‘affiliated’ FTE resident cap onto the hospital’s reference cost reporting period * * * If a hospital is part of a Medicare affiliated group for the program year beginning July 1, 2003, we are proposing to compare the hospital’s July 1, 2003 ‘affiliated’ FTE resident cap to its resident level on the most recent cost report ending on or before September 30, 2002.’’ We did not finalize this approach under the MMA because we received public comments that opposed this approach and ‘‘expressed great concern regarding the proposed methodology whereby a hospital’s ‘affiliated’ FTE resident cap for the period July 1, 2003 to June 30, 2004 would be compared to the hospital resident FTE counts corresponding to a different (in some cases, not even overlapping) period for purposes of section 422’’ (69 FR 49128). Those commenters stated that CMS should provide the most straightforward option and that ‘‘it would not ‘make sense’ to reduce the FTE resident cap of a hospital based on a comparison of its cap in an affiliation agreement that was from a period different than its reference cost reporting period. Therefore, most commenters generally recommended that each hospital’s specific July 1, 2003 ‘affiliated’ FTE resident cap should be compared to its FTE resident count for the July 1, 2003 through June 30, 2004 academic year, while one commenter recommended that CMS allow each hospital to elect whether to have its specific July 1, 2003 ‘affiliated’ FTE resident cap compared to its FTE resident count for the [cost reporting] period July 1, 2003 to June 30, 2004, for purposes of determining if and by how much the hospital’s FTE resident caps would be reduced’’ (69 FR 49128). As we acknowledged when we implemented section 422 of the MMA, hospitals either benefit or are disadvantaged somewhat in each instance that Congress chooses a base year or years for purposes of determining future payments (69 FR 49129). Similarly, for section 5503 of the Affordable Care Act, Congress clearly specified the base years, and the public has been given notice since November 24, 2010, that they consist of the three most recent cost reporting periods ending before March 23, 2010, for which a cost report has been settled or submitted to the Medicare contractor by March 23, 2010. We strove to implement section 422 of the MMA in the fairest and most reasonable manner, and we are making every effort to implement section 5503 of the VerDate Mar<15>2010 19:46 Aug 17, 2011 Jkt 223001 Affordable Care Act consistently with section 422 whenever feasible. We believe it is certainly reasonable to conclude that just as many commenters opposed our original proposal under section 422 to superimpose the adjusted affiliated FTE resident cap from the affiliation agreement ‘‘as of July 1, 2003’’ onto an earlier reference cost report, many commenters would again oppose and reject a final similar policy under section 5503. Therefore, in the case of section 203 of the MMEA, we believe it would be inappropriate to adopt the position of a small number of commenters suggesting that we compare an FTE resident cap that applies to a later Medicare GME affiliation agreement to an FTE resident count from an earlier cost reporting period. While the commenters’ suggested method in the instant case would help a particular hospital, because under the July 1, 2009 affiliation agreement the commenters mentioned, this hospital happened to have given away slots, thereby reducing its adjusted FTE resident caps, this method could adversely affect other hospitals that were receiving slots under the July 1, 2009 affiliation agreement. Therefore, we are not adopting the commenters’ suggestion regarding use of the adjusted FTE cap from the Medicare GME affiliation agreement in effect for academic year 2010, while determining the FTE count from whichever cost reporting period CMS would otherwise use. We do not agree with the commenters’ second suggestion to use the adjusted FTE resident cap and the FTE resident count from a cost reporting period that at least partially overlaps the July 1, 2009–June 30, 2010 academic year because this could result in use of a reference cost report that does not comport with the statutory requirement to use one of the three most recent cost reporting periods ending before March 23, 2010, for which a cost report has been settled or has been submitted to the Medicare contractor by March 23, 2010. As the commenters even noted, for a hospital with a December 31 fiscal year end, this period would be its fiscal year 2009 cost reporting period. However, that cost report would not likely have been submitted to the Medicare contractor by March 23, 2010. The commenters stated that they have no objection to the use of an earlier cost reporting period where the adjusted FTE caps for those earlier periods are favorable to a hospital. However, we do not believe it is appropriate to institute a policy where hospitals may pick and choose which cost reporting period would be most favorable to them to use PO 00000 Frm 00248 Fmt 4701 Sfmt 4700 as the reference cost reporting period. As we stated in response to a comment in the November 24, 2010 final rule (75 FR 72160), ‘‘* * * we do not believe it would be appropriate to include in the determination of which cost reports are used to establish a hospital’s reference resident level, those cost reporting periods that occurred at the time the Affordable Care Act was in development. Rather the cost reporting period used to determine the reference resident level should be a cost reporting period that reflects a number of FTE residents that a hospital is accustomed to training, not a number of FTE residents that is based on a hospital’s rushed attempt to avoid a cap reduction.’’ Regarding the commenters’ third recommendation, there is no skirting the issue that there are still unfilled slots. We do not have the authority to waive cap reductions for any excess capacity, even for hospitals that may demonstrate that they have been or are consistently filling almost all of their FTE slots. Regarding the fourth recommendation, we do not believe there is any validity to considering whether a hospital had evidence of cross-training activities in years prior to the July 1, 2009–June 30, 2010 academic year. Evidence of crosstraining does not equate to an actual, formal Medicare GME affiliation agreement in which responsible representatives of each hospital agree to exchange FTE resident cap slots. Rather, in accordance with the long-standing regulations regarding Medicare GME affiliation agreements at section 413.79(f)(1), a formal agreement must be submitted to CMS and the Medicare contractor by July 1 of an academic year in order to effectuate the transfer of FTE slots. We cannot deem hospitals to be affiliated simply because cross-training occurred. Accordingly, we are not adopting the commenters’ third and fourth suggestions either. Comment: Commenters stated that CMS should not be resistant to changing its policy as expressed in the interim final rule with comment period out of a concern that doing so would violate the ‘‘logical outgrowth’’ doctrine. The commenters asserted that their comments addressed the ‘‘exact same’’ subject-matter as that addressed in the interim final rule with comment period, namely implementing section 203 of the MMEA for hospitals that are members of an affiliated group. Although CMS did not make any proposals pertaining to the use of academic year 2010 Medicare GME affiliation agreements in the interim final rule with comment period, the commenter stated that CMS should have done so as part of ‘‘proper E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations rulemaking.’’ Further, the commenters asserted that CMS should have recognized that members of an affiliated group in academic year 2010 are entitled to the protections of the statute; therefore, CMS cannot use its flawed, incomplete analysis as a basis for rendering its final implementation decisions deficient as well. In addition, the commenters argued that CMS has taken latitude in prior rules and in implementing a similar provision in the MMA, where CMS made major changes between its proposed rule and final rule concerning cap reductions for affiliated providers. Lastly, the commenters understood that CMS is unlikely to apply changes made at this juncture to its calculation of the pool of slots to be reallocated and as such, there are no affected parties meriting protection under the logical outgrowth doctrine. Therefore, based on these arguments, commenters expect CMS to furnish a legal memorandum that addresses why it is legally impossible for CMS to revise its interim final rule with comment period. Response: Contrary to the commenters’ assumption, we are not concerned about logical outgrowth as we do believe that the commenters’ comments are within the scope of the interim final rule with comment period on determination of possible FTE cap reductions for hospitals that are members of a Medicare GME affiliated group. Rather, we disagree with the commenters’ arguments both on statutory and policy grounds, as explained in response to the same commenters’ comments above. (For example, we disagree with the commenters on what the plain reading of the language at section 203 of the MMEA is, and we disagree with the commenters that it would be appropriate to include in the determination of which cost reports are used to establish a hospital’s reference resident level, those cost reporting periods that occurred at the time the Affordable Care Act was in development). Therefore, we are not accepting the commenters’ recommendations and are finalizing the methodology for determining if and by how much the FTE resident caps of hospitals in Medicare GME affiliated groups are to be reduced, as expressed in the interim final rule with comment period (76 FR 13515). Comment: Commenters urged CMS to allow hospitals to provide updated FTE count data to CMS, given the severity of the consequences of the reductions. Commenters stated that CMS has given its contractors until December 31, 2011, to finalize their FTE cap reduction VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 audits so there is sufficient time to review any data that hospitals may furnish them regarding their actual FTE counts for the cost reporting periods at issue. Response: If, by allowing hospitals to provide ‘‘updated’’ FTE count data, the commenters mean that hospitals should be allowed to provide FTE count data from cost reporting periods after the three applicable reference cost reporting periods, as we stated above, we do not believe it would be appropriate to include in the determination of which cost reports are used to establish a hospital’s reference resident level, those cost reporting periods that occurred at the time the Affordable Care Act was in development. In response to the commenters’ assertion that because CMS has given its contractors until December 31, 2011, to finalize FTE cap reduction audits, there is sufficient time for the contractors to review data regarding actual FTE counts, as we explained in the November 24, 2010 final rule (75 FR 72154), this provision regarding audits continuing until December 31, 2011, was intended to be used only under certain limited circumstances. Specifically, we explained that ‘‘there may be instances where the audits of the reference resident levels may not be completed by July 1, 2011, and that, within the scope of their normal audit work, the Medicare contractors will complete as many of these audits as possible, and some of the audits may not be completed until December 31, 2011’’ (emphasis added) (75 FR 72154). Thus, the intent was not to require the Medicare contractors to perform lengthy and protracted reviews specifically for the purpose of implementing section 5503, nor to allow hospitals to present additional FTE resident count data in all instances. Rather, only if additional FTE resident count data was required by and presented to the contractor within the scope of the contractor’s normal audit work, and that normal audit work would not be completed by July 1, 2011, it would be permissible for the audit work to proceed until December 31, 2011. Therefore, as implemented, the estimate of slots available for redistribution that CMS determined prior to July 1, 2011, would be relatively close to the number of available slots that would be determined based on the final audited data. If we were to allow all hospitals to revise their cost report data and delay all decisions until December 31, 2011, the estimated number of slots available for redistribution would be rendered completely meaningless. Comment: Commenters expressed general dissatisfaction with caps on PO 00000 Frm 00249 Fmt 4701 Sfmt 4700 51723 resident FTEs because they believed the caps are outdated. One commenter expressed dissatisfaction that urban teaching hospitals in several states were unjustly excluded from receiving resident slots under section 5503 of the Affordable Care Act. Response: We thank the commenters for these comments, but note that they are not within the scope of the interim final rule with comment period. b. Final Policies After consideration of the public comments we received, we are finalizing all of the provisions set forth in the March 14, 2011 interim final rule with comment period, including the revision of § 413.79(m)(7) of the regulations, without modification. 4. Collection of Information Requirements This document does not impose information collection and recordkeeping requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995. (44 U.S.C. Chapter 35) 5. Regulatory Impact Statement a. Statement of Need We need to issue a document that will finalize the provisions of the March 14, 2011 interim final rule with comment period, including the regulatory provisions under 42 CFR 413.79(m)(7). b. Overall Impact We have examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96– 354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104–4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2)). Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51724 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations in any 1 year). This rule does not reach the economic threshold and thus is not considered a major rule. In the November 24, 2010 final rule which implemented section 5503 of the Affordable Care Act (75 FR 72239), we mentioned that we were unable to project how many FTE resident slots will be available for redistribution under section 5503 of the Affordable Care Act. Unlike section 422 of the MMA, which also provided for a redistribution of FTE resident slots but provided that the redistributed slots will be paid using the national average per resident amount (PRA) for direct GME payment purposes, section 5503 of the Affordable Care Act requires that hospitals be paid for their additional FTE resident slots using the hospitals’ specific PRAs. Because we had not yet determined the number of FTE resident slots that will be redistributed under section 5503 of the Affordable Care Act or which hospitals will be receiving additional FTE resident slots, we could not calculate a direct GME impact for section 5503 of the Affordable Care Act. Similarly, we cannot calculate a direct GME dollar impact for section 203 of the MMEA. Because the general effect of section 203 of the MMEA is to protect from loss or mitigate the loss of slots of hospitals that are members of a Medicare GME affiliated group, there are fewer direct GME and IME slots available for redistribution to other hospitals. However, we are unable to compute a dollar impact on the redistribution of those slots to other hospitals. First, although there are currently 307 hospitals that are members of a Medicare GME affiliated group, these hospitals were not necessarily members of Medicare GME affiliated groups during the reference cost reporting periods specified by section 5503 of the Affordable Care Act. Second, since, as of this date, final determinations have not been made with regard to the number of slots that all affected hospitals will be losing or receiving, we cannot determine a financial impact for purposes of direct GME and IME for this provision. In the interim final rule with comment period, we solicited public comment on our analysis. We did not receive any public comments specific to this impact. The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 physician practices, hospitals and other providers are small entities, either by nonprofit status or by qualifying as small businesses under the Small Business Administration’s size standards (revenues of less than $7.0 to $34.5 million in any 1 year). States and individuals are not included in the definition of a small entity. For details, see the Small Business Administration’s Web site at https://ecfr.gpoaccess.gov/ cgi/t/text/text-idx?c=ecfr&sid=2465b 064ba6965cc1fbd2eae60854b11&rgn= div8&view=text&node=13:1.0.1.1.16.1. 266.9&idno=13. Individuals and States are not included in the definition of a small entity. The RFA requires an agency to prepare an initial regulatory flexibility analysis when they issue a general notice of proposed rulemaking. However, HHS has maintained a longstanding policy of voluntarily preparing initial regulatory flexibility analyses for all rulemaking. The Secretary has determined that this final rule will not have a significant economic impact on a substantial number of small entities. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because the Secretary has determined that this final rule 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 whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2011, that threshold is approximately $136 million. This rule will have no consequential effect on State, local, or tribal governments 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. PO 00000 Frm 00250 Fmt 4701 Sfmt 4700 Because this rule does not impose any costs on State or local governments, the requirements of Executive Order 13132 are not applicable. c. Anticipated Effects We believe the general effect of section 203 of the MMEA is that it could protect from loss or mitigate the loss of slots for hospitals that are members of a Medicare GME affiliated group, and therefore, there could be fewer direct GME and IME slots available for redistribution to other hospitals. d. Alternatives Considered Although there may be alternatives, the method we are finalizing in this final rule is the most consistent with that of a similar provision for hospitals that are members of Medicare GME affiliated groups implemented as part of section 422 of the MMA. e. Conclusion The analysis above, together with the remainder of this preamble, provides a regulatory flexibility analysis as well as a regulatory impact analysis. For the reasons outlined in the RIA, we are not preparing an analysis for either the RFA or section 1102(b) of the Act because we have determined that this final rule will not have a direct significant economic impact on a substantial number of small entities or a direct significant impact on the operations of a substantial number of small rural hospitals. In accordance with the provisions of Executive Order 12866, this rule was reviewed by the Office of Management and Budget. 6. Comment on Issues Outside of the Scope of the Interim Final Rule With Comment Period We received one comment regarding nuyrsing and allied health pass-through payments. This comment is outside of the scope of the interim final rule with comment period. Therefore, we are not responding to is in this final rule. V. Changes to the IPPS for CapitalRelated Costs A. Overview Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient acute hospital services ‘‘in accordance with a prospective payment system established by the Secretary.’’ Under the statute, the Secretary has broad authority in establishing and implementing the IPPS for acute care hospital inpatient capitalrelated costs. We initially implemented the IPPS for capital-related costs in the Federal fiscal year (FY) 1992 IPPS final rule (56 FR 43358), in which we E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 established a 10-year transition period to change the xpayment methodology for Medicare hospital inpatient capitalrelated costs from a reasonable costbased methodology to a prospective methodology (based fully on the Federal rate). FY 2001 was the last year of the 10year transition period established to phase in the IPPS for hospital inpatient capital-related costs. For cost reporting periods beginning in FY 2002, capital IPPS payments are based solely on the Federal rate for almost all acute care hospitals (other than hospitals receiving certain exception payments and certain new hospitals). (We refer readers to the FY 2002 IPPS final rule (66 FR 39910 through 39914) for additional information on the methodology used to determine capital IPPS payments to hospitals both during and after the 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 capital 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 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 (§ 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, for a certain period after the transition period, eligible hospitals may 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. Hospitals eligible for special exceptions payments are required to submit documentation to the fiscal intermediary or MAC indicating the completion date of their project. 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. Under this limitation on the period for special exceptions payments at § 412.348(g)(7) of the regulations, FY 2012 is the final year hospitals can receive special exceptions payments. (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 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 PO 00000 Frm 00251 Fmt 4701 Sfmt 4700 51725 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 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 E:\FR\FM\18AUR2.SGM 18AUR2 51726 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Federal rate effective for discharges occurring on or after October 1, 2004. mstockstill on DSK4VPTVN1PROD with RULES2 E. Changes for FY 2012: MS–DRG Documentation and Coding Adjustment 1. Background 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 747 MS–DRGs, and for FY 2012, we are adopting 4 additional MS– DRGs (for a total of 751 MS–DRG). 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 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 an additional documentation and coding VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 adjustment of ¥0.9 percent to the FY 2009 IPPS national standardized amounts and the national capital Federal rate. The documentation and coding adjustments established in the FY 2009 IPPS final rule, as amended by Public Law 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).) In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24092 through 24101), we presented the results of a retrospective evaluation of the FY 2008 data for claims paid through December 2008. We sought public comment on our methodology and analysis and our proposal to apply a prospective adjustment to address the effect of documentation and coding changes unrelated to changes in real case-mix in FY 2008. In addition, we sought public comment on addressing in the FY 2011 rulemaking cycle any effect of documentation and coding changes that do not reflect real changes in case-mix for discharges occurring during FY 2009. 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 (74 FR 43926 through 43928). For the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 24014), 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. Specifically, we performed a retrospective evaluation of the FY 2009 PO 00000 Frm 00252 Fmt 4701 Sfmt 4700 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 case-mix due to documentation and coding that did not reflect real changes in case-mix 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 the 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 stated March 2010.) As intended, as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50355), we updated our analysis with FY 2009 data on claims paid through March 2010 in that final rule. For the FY 2011 IPPS/LTCH PPS 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. 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 exceeded the cumulative ¥1.5 percent prospective documentation and coding adjustment that had already been applied to the national capital Federal rate by 3.9 percentage points (5.4 percent minus 1.5 percent). Therefore, in FY 2011, 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. Therefore, in that same 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, we implemented an adjustment to the FY 2011 national capital Federal rate of ¥2.9 percent to account for part of 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. We also established that 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 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 subsequent years. Furthermore, we stated our intention to address 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) in future rulemaking cycles. 2. Prospective MS–DRG Documentation and Coding Adjustment to the National Capital Federal Rate for FY 2012 and Subsequent Years As we stated in the FY 2012 IPPS/ LTCH PPS proposed rule, we continue to believe that it is appropriate to make adjustments to the capital IPPS rates to eliminate the effect of any documentation and coding changes as a result of the implementation of the MS– DRGs. These adjustments are intended to ensure that future annual aggregate IPPS payments are the same as payments that otherwise would have been made had the prospective adjustments for documentation and coding applied in FY 2008 and FY 2009 accurately reflected the changes due to documentation and coding that occurred in those years. As noted in section V.A. of the preamble of the proposed rule and 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 national 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 discussed above, based on our retrospective evaluation of the FY 2009 claims, our actuaries determined that VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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. To date, we have made adjustments to the national capital Federal rate to account for 4.4 percent (that is, ¥0.6 percent in FY 2008, ¥0.9 percent in FY 2009, and ¥2.9 percent in FY 2011) of the estimated 5.4 percent documentation and coding effect. Thus, our current estimate of the remaining adjustment to the national capital Federal rate is ¥1.0 percent to account for the effect of documentation and coding changes under the MS–DRG system for FYs 2008 and 2009. In the proposed rule, under the Secretary’s broad authority under section 1886(g) of the Act, in conjunction with section 1886(d)(3)(A)(vi) of the Act and section 7(b) of Public Law 110–90, consistent with the intention we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50357), we proposed to reduce the national capital Federal rate in FY 2012 by ¥1.0 percent to account for the remainder of the cumulative effect of the estimated changes in documentation and coding under the MS–DRG system in FYs 2008 and 2009 that did not reflect real changes in case-mix. Furthermore, consistent with the documentation and coding adjustments we have made in the past, we proposed to leave this proposed ¥1.0 percent adjustment in place for subsequent fiscal years to account for the effect in FY 2012 and subsequent years. As explained above, this proposed ¥1.0 percent adjustment accounts for the remainder of our current estimate of the 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, ¥0.9 percent, and ¥2.9 percent adjustments. We did not receive any public comments on our proposal to permanently reduce the national capital Federal rate in FY 2012 by ¥1.0 percent to account for the remainder of the cumulative effect of the estimated changes in documentation and coding under the MS–DRG system that occurred during FYs 2008 and 2009 that did not reflect real changes in case-mix. (The public comments we received on our methodology and the magnitude of our estimate of cumulative effect of the estimated changes in documentation and coding under the MS–DRG system that occurred during FYs 2008 and 2009 that did not reflect real changes in casemix are discussed in section II.D. of this preamble.) PO 00000 Frm 00253 Fmt 4701 Sfmt 4700 51727 In this final rule, under the Secretary’s broad authority under section 1886(g) of the Act, in conjunction with section 1886(d)(3)(A)(vi) of the Act and section 7(b) of Pub. L. 110–90, consistent with the intention we stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50357), as we proposed, we are reducing the national capital Federal rate in FY 2012 by ¥1.0 percent to account for the remainder of the cumulative effect of the estimated changes in documentation and coding under the MS–DRG system that occurred during FYs 2008 and 2009 that did not reflect real changes in casemix. Furthermore, consistent with the documentation and coding adjustments we have made in the past, and as we proposed, we will leave this ¥1.0 percent adjustment in place for subsequent fiscal years to account for the effect in FY 2012 and subsequent years. As explained above, this ¥1.0 percent adjustment accounts for the remainder of our current estimate of the cumulative effect of documentation and coding changes under the MS–DRG system that occurred during FYs 2008 and 2009 of ¥5.4 percent minus the existing ¥0.6 percent, ¥0.9 percent, and ¥2.9 percent adjustments. 3. 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 2011 IPPS/LTCH PPS final rule (75 FR 50358 through 50359), we discussed the retrospective evaluation of the FY 2009 claims data from the March 2010 update of the MedPAR file of hospitals located in Puerto Rico using the same methodology used to estimate documentation and coding changes under IPPS for non-Puerto Rico hospitals. This analysis 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 was approximately 2.6 percent. (As discussed in that same final rule, the Puerto Rico-specific capital rate was not adjusted for the cumulative effects of documentation and coding changes in FY 2008 or FY 2009.) We also explained that we continue to believe that such an adjustment is appropriate because all hospitals have the same financial incentives for documentation and coding improvements, and the same ability to benefit from the resulting increase in E:\FR\FM\18AUR2.SGM 18AUR2 51728 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations aggregate payments that do not reflect real changes in case-mix. Given this case-mix increase due to changes in documentation and coding under the MS–DRGs, consistent with the adjustment we made to the FY 2011 national capital Federal rate (discussed above) and consistent with our adjustment to the FY 2011 Puerto Ricospecific standardized amount, under the Secretary’s broad authority under section 1886(g) of the Act, we established an adjustment to the Puerto Rico-specific capital rate of –2.6 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 implementation of other prospective MS–DRG documentation and coding adjustments to the capital Federal rate and operating IPPS standardized amounts, we established that we will leave that ¥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 case-mix in subsequent years. The ¥2.6 percent adjustment to the capital Puerto Rico-specific rate that we made in FY 2011 reflects the entire amount of our current estimate of the effects of 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. Consequently, in the FY 2012 IPPS/LTCH PPS proposed rule, we did not propose to make any additional adjustments to the capital Puerto Ricospecific rate for FY 2012 for the effect of documentation and coding that did not reflect real changes in case-mix. We did not receive any public comments on our proposal not to make any additional adjustments to the capital Puerto Rico-specific rate for FY 2012 for the effect of documentation and coding changes that did not reflect real changes in case-mix and, therefore, are adopting our proposal as final in this final rule. mstockstill on DSK4VPTVN1PROD with RULES2 F. Other Changes for FY 2012 The annual update to the capital IPPS national Federal and Puerto Ricospecific rates, as provided for at § 412.308(c), for FY 2012 is discussed in section III. of the Addendum to this final rule. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 VI. Changes for Hospitals Excluded From the IPPS 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 IPPS-excluded 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 2012 IPPS/LTCH PPS proposed rule (76 FR 25968), we proposed that the FY 2012 rate-ofincrease percentage to be applied to the target amount for cancer and children’s hospitals and RNHCIs would be the estimated FY 2012 percentage increase in the IPPS operating market basket, estimated to be 2.8 percent. 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 hospitals, 11 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 2012, 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 PO 00000 Frm 00254 Fmt 4701 Sfmt 4700 reasons discussed in the FY 2006 IPPS final rule. In the FY 2012 IPPS/LTCH PPS proposed rule, 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 2012. Therefore, based on IHS Global Insight, Inc.’s 2011 first quarter forecast, with historical data through the 2010 fourth quarter, we estimated that the FY 2012 update to the IPPS operating market basket would be 2.8 percent (that is, the estimate of the market basket rate-ofincrease). However, we proposed that if more recent data become available for the final rule, we would use them to calculate the IPPS operating market basket update for FY 2012. Therefore, based on IHS Global Insight, Inc.’s 2011 second quarter forecast, with historical data through the 2011 first quarter, we estimate that the final FY 2012 update to the IPPS operating market basket is 3.0 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 2012 IPPS operating market basket, the FY 2012 rate-ofincrease percentage that is applied to the FY 2011 target amounts in order to calculate the final FY 2012 target amounts for cancer and children’s hospital and RNHCIs is 3.0 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 final update changes to the Federal payment rates for LTCHs under the LTCH PPS for FY 2012. The annual updates for the IRF PPS and the IPF PPS are issued by the agency in separate Federal Register documents. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations B. Critical Access Hospital (CAH) Payment for Ambulance Services mstockstill on DSK4VPTVN1PROD with RULES2 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. Section 1834(l) of the Act sets forth the payment rules for ambulance services. Generally, payment to ambulance providers and suppliers for ambulance services are made under the ambulance fee schedule. Section 205 of Public Law 106–554 (BIPA) amended section 1834(l) of the Act by adding a paragraph (8) to that section, which provides that the Secretary shall pay 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 the CAH. The term ‘‘provider of ambulance services’’ includes all Medicare-participating providers that submit claims under Medicare for ambulance services (for example, hospitals, CAHs, skilled nursing facilities (SNFs), and home health agencies (HHAs)). The term ‘‘supplier of ambulance services’’ is defined as an entity that provides ambulance services and that is independent of any Medicare-participating or nonMedicare-participating provider. Section 205 was effective for services furnished on or after December 21, 2000. Regulations implementing section 1834(l)(8) of the Act are set forth at 42 CFR 413.70(b)(5). In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50361), we implemented section 3128(a) of the Affordable Care Act, which amended section 1834(l)(8) of the Act by inserting ‘‘101 percent of’’ VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 before ‘‘the reasonable costs.’’ As such, section 3128(a) increased payment for ambulance services furnished by a qualifying CAH or entity owned and operated by a CAH to 101 percent of reasonable costs, effective for cost reporting periods beginning on or after January 1, 2004. We amended the regulations at § 413.70(b)(5)(i) to conform to this statutory change by stating 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 furnishing those services is the only provider or supplier of ambulance services located within a 35-mile drive of the CAH or the entity. 2. Requirement for CAH Ambulance Within a 35-Mile Location of a CAH or Entity Section 413.70(b)(5) of the existing regulations states that payment for ambulance services furnished by a CAH or an entity that is owned and operated by a CAH is 101 percent of 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’’. However, the statutory language at section 1834(l)(8) of the Act states that a CAH is eligible to be paid based on 101 percent of reasonable costs for ambulance services furnished by the CAH or by an entity that is owned and operated by a CAH, but only if the CAH or the entity is the only provider or supplier of ambulance services that is located within a 35-mile drive of such CAH. Because the statute only requires that there be no other provider or supplier of ambulance services within a 35-mile drive of the CAH and does not address whether there is another provider or supplier of ambulance services within a 35-mile drive of the CAH-owned and operated entity, we believe that the existing regulation is not consistent with the plain reading of the statutory language PO 00000 Frm 00255 Fmt 4701 Sfmt 4700 51729 at section 1834(l)(8) of the Act. In addition, we believe the plain reading of the statutory language at section 1834(l)(8) of the Act does not address the situation where there is no provider or supplier of ambulance services within a 35-mile drive of the CAH, but there is a CAH-owned and operated entity furnishing ambulance services that is more than a 35-mile drive from the CAH, thus creating a ‘‘gap’’ in the statutory language. That is, the statutory language does not address the situation where the entity that is owned and operated by the CAH is located more than a 35-mile drive from the CAH. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25969 through 25971), in order to ensure that the regulations are consistent with the plain language of section 1834(l)(8) of the Act, we proposed to revise § 413.70(b)(5)(i) by adding a new paragraph (C) to state that, effective for cost reporting periods beginning on or after October 1, 2011, payment for ambulance services furnished by a CAH or by a CAH-owned and operated entity is 101 percent of 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 (Figure 1). Under this proposed change, the CAH-owned and operated entity would be paid 101 percent of reasonable costs for its ambulance services only if there is no other provider or supplier of ambulance services within a 35-mile drive of the CAH. However, if there is a provider or supplier of ambulance services located within a 35-mile drive of the CAH (Figure 2), the CAH-owned and operated entity would not be paid at 101 percent of reasonable costs, but instead would be paid under the ambulance fee schedule. Figure 1: The CAH-owned and operated entity would be paid at 101 percent of reasonable costs for its ambulance services because there is no other provider or supplier of ambulance services within a 35-mile drive of the CAH. E:\FR\FM\18AUR2.SGM 18AUR2 51730 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations In addition, in the FY 2012 IPPS/ LTCH PPS proposed rule, we proposed to establish a policy that would address the ‘‘gap’’ in the statutory language, that is, where the CAH-owned and operated entity furnishing ambulance services is more than a 35-mile drive from the CAH, but there is no other provider or supplier of ambulance services located within a 35-mile drive of the CAH. We proposed to include in the proposed new paragraph (C) of § 413.70(b)(5)(i) a provision which states that, effective for cost reporting periods beginning on or after October 1, 2011, if there is no provider or supplier of ambulance services within a 35-mile drive of the CAH and there is a CAH-owned and operated entity that is more than a 35mile drive from the CAH, the CAHowned and operated entity would be paid at 101 percent of reasonable costs for its ambulance services as long as that entity is the closest provider or supplier of ambulance services to the CAH (Figure 3). Allowing the CAH-owned and operated entity to be paid at 101 percent of reasonable costs if there is no other provider or supplier of ambulance services that is closer to the CAH is consistent with the original purpose of section 1834(l)(8) of the Act, which was intended to help ensure an adequate level of ambulance services in areas served by CAHs. The statute allows for reasonable cost-based payment only if there is no other provider or supplier of ambulance services within a 35-mile drive of the CAH. If there is another provider or supplier of ambulance services located within a 35-mile drive of the CAH, the statute does not allow for payment to the CAH or a CAHowned and operated entity at 101 percent of reasonable costs because there is an adequate level of ambulance services available. Accordingly, where a CAH-owned and operated entity is located more than a 35-mile drive from the CAH, we proposed to allow payment at 101 percent of reasonable costs only if there is no other provider or supplier of ambulance services located closer to the CAH. If there is a closer provider or supplier of ambulance services, that closer provider or supplier would also be assuring an adequate level of ambulance services in the area served by the CAH, and there would be no need to pay the CAH-owned and operated entity at 101 percent of reasonable costs in order to ensure access to ambulance services. Therefore, if the CAH-owned and operated entity (located more than a 35-mile drive from the CAH) is not the closest provider or supplier of ambulance services to the CAH (Figure 4), the CAH-owned and operated entity would be reimbursed under the ambulance fee schedule. mstockstill on DSK4VPTVN1PROD with RULES2 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00256 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.020</GPH> supplier of ambulance services located within a 35-mile drive of the CAH. ER18AU11.019</GPH> The CAH-owned and operated entity would be paid under the ambulance fee schedule for its ambulance services because the CAH-owned and operated entity is not the only provider or Figure 2: Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations a 35-mile drive from the CAH, it is the closest provider or supplier of ambulance services to the CAH. Figure 4: The CAH-owned and operated entity would receive payment under the ambulance fee schedule for its ambulance services because there is another provider or supplier of ambulance services that is closer to the CAH than the CAH-owned and operated entity. Comment: One commenter requested that CMS apply a similar policy as that proposed for CAH ambulance services to any provider-based department of a CAH. Response: We believe that the commenter’s request to address policies concerning other CAH provider-based departments is outside of the scope of the proposed rule. Our proposal only addressed the requirements that a CAH and CAH-owned and operated entity would need to meet in order to be paid 101 percent of reasonable costs for ambulance services. Therefore, we are not responding to this comment in this final rule, but may consider the commenter’s suggestion in future rulemaking. Comment: One commenter stated that, while the examples discussed in the proposed rule clearly specified how CAHs and CAH-owned and operated entities in certain situations would be paid, the commenter was aware of other situations that were not addressed in the proposed rule. The commenter stated that many facilities operate ambulance services in several locations and requested that CMS address the following scenario (referred to as ‘‘scenario one’’ in the remainder of this section): ‘‘A CAH has a CAH-based ambulance on its campus. There is no other ambulance service within a 35-mile drive of the CAH. The CAH owns and operates a satellite of its ambulance service at a 45-mile drive from the CAH. Under this scenario, the CAH-based ambulance site would be paid at 101 percent of reasonable cost, but would the CAH-owned satellite be paid at 101 percent of costs or on the fee schedule? Note that the two sites represent different locations of the same ambulance entity.’’ The commenter also requested that CMS address the following scenario (referred to as ‘‘scenario two’’ in the remainder of this section): ‘‘In another scenario, assume that both the CAH and the CAH-owned entity’s ambulance services would be paid at 101 percent of reasonable costs in the above situation. How would the CAH’s ambulance services be reimbursed if there was a non-CAH owned or operated ambulance service VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00257 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.022</GPH> reasonable costs for its ambulance services because even though the CAHowned and operated entity is more than ER18AU11.021</GPH> The CAH-owned and operated entity would be paid at 101 percent of mstockstill on DSK4VPTVN1PROD with RULES2 Figure 3: 51731 mstockstill on DSK4VPTVN1PROD with RULES2 51732 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations that was located between the CAH and its ambulance satellite site? For example, if the CAH-owned entity was located 45 miles from the CAH (which had its own ambulance onsite), but the independent ambulance was located 40 miles from the CAH? Would the CAHowned entity 45 miles from the CAH be paid on a fee basis or at 101 percent of reasonable costs?’’ Response: Regarding scenario one, the type of payment that the CAH and the CAH-owned and operated entity would receive for their ambulance services would depend on whether the CAH and the CAH-owned and operated entity operate as one legal entity or are two separate legal entities. If the CAH and the CAH-owned and operated entity are two separate legal entities, the fact that the CAH has an ambulance on its main campus would preclude the CAHowned and operated entity from receiving payment at 101 percent of reasonable costs for its ambulance services because the CAH-owned and operated entity is not the only provider of ambulance services that is located within a 35-mile drive from the CAH. The CAH-owned and operated entity would not receive payment based on reasonable cost but, instead, would be paid using the ambulance fee schedule because there is a provider or supplier of ambulance services located within a 35-mile drive of the CAH, which is the ambulance stationed at the main CAH. However, if the CAH and the CAHowned and operated entity are one legal entity, both the CAH and the CAHowned and operated entity would be paid based on 101 percent of reasonable costs for their ambulance services as long as there is no other provider or supplier of ambulance services closer to the main CAH than the CAH-owned and operated entity. For purposes of discussing scenario two, we assume that the CAH and the CAH-owned and operated entity are one legal entity. As described above, in scenario two, the CAH has an ambulance service on its main campus, a CAH-owned and operated entity is located a 45-mile drive from the CAH, and there is also a non-CAH ambulance that is located a 40-mile drive from the CAH. In this scenario, because the nonCAH ambulance is closer to the CAH than the CAH-owned and operated entity, the CAH-owned and operated entity would not receive payment at 101 percent of reasonable costs but rather would be paid using the ambulance fee schedule. However, because there is no other provider or supplier of ambulance services within a 35-mile drive of the main CAH, the main CAH would be paid based on 101 percent of reasonable costs for its ambulance services. After consideration of the public comments we received, we are adopting our proposals without modification. Specifically, we are adopting, as final, the proposed revision of § 413.70(b)(5)(i) of the regulations by adding a new paragraph (C) to specify that, for cost reporting periods beginning on or after October 1, 2011, payment for ambulance services furnished by a CAH or by a CAH-owned and operated entity is 101 percent of 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. In addition, we are adopting, as final, our proposal to include in new § 413.70(b)(5)(i) (C), a provision to address the ‘‘gap’’ in the statutory language, where there is no other provider or supplier of ambulance services located within a 35-mile drive of the CAH, but there is a CAH-owned and operated entity furnishing ambulance services more than a 35-mile drive from the CAH. Specifically, for cost reporting periods beginning on or after October 1, 2011, if there is no provider or supplier of ambulance services located within a 35-mile drive of the CAH and there is a CAH-owned and operated entity that is more than a 35-mile drive from the CAH, the CAHowned and operated entity will be paid at 101 percent of reasonable costs for its ambulance services as long as that entity is the closest provider or supplier of ambulance services to the CAH. However, if there is a provider or supplier of ambulance services that is closer to the CAH than the CAH-owned and operated entity, the CAH-owned and operated entity will be paid based on the ambulance fee schedule. We also are finalizing a conforming change to § 413.70(b)(5)(i)(B) to make the effective date of that paragraph consistent with the effective date of the new paragraph (C). C. Report of Adjustment (Exceptions) Payments Section 4419(b) of Public Law 105–33 requires the Secretary to publish Class of hospital 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 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 provider reimbursement (NPR). Once the hospital or hospital unit 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 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 2010. 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 2010. As indicated above, the adjustments made during FY 2010 only pertain to cost reporting periods ending in years prior to FY 2009. Total adjustment payments given to excluded hospitals and hospital units during FY 2010 are $11,364,155. 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. Psychiatric .................................................................................................................................... Children’s ..................................................................................................................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00258 Excess cost over ceiling Number Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 1 1 18AUR2 $951,810 377,648 Adjustment payments $884,441 305,160 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Class of hospital Excess cost over ceiling Number 51733 Adjustment payments Cancer ......................................................................................................................................... Religious Nonmedical Health Care Institution (RNHCI) .............................................................. 2 0 18,108,765 0 10,174,554 0 Total ...................................................................................................................................... ........................ ........................ 11,364,155 VII. Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2012 A. Background of the LTCH PPS mstockstill on DSK4VPTVN1PROD with RULES2 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 an LTCH as ‘‘a hospital which has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days.’’ Section 1886(d)(1)(B)(iv)(II) of the Act also provides an alternative definition of LTCHs: specifically, a hospital that first 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, VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 diagnosis-related 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 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. PO 00000 Frm 00259 Fmt 4701 Sfmt 4700 During this 5-year transition period, a LTCH’s total payment under the PPS was based on an increasing percentage of the Federal rate with a corresponding decrease in the percentage of the LTCH PPS payment that is based on reasonable cost concepts. However, effective for cost reporting periods beginning on or after October 1, 2006, total LTCH PPS payments are based on 100 percent of the Federal rate. In addition, in the August 30, 2002 final rule, we presented an in-depth discussion of the LTCH PPS, including the patient classification system, relative weights, payment rates, additional payments, and the budget neutrality requirements mandated by section 123 of the BBRA. The same final rule that established regulations for the LTCH PPS under 42 CFR Part 412, Subpart O also contained LTCH provisions related to covered inpatient services, limitation on charges to beneficiaries, medical review requirements, furnishing of inpatient hospital services directly or under arrangement, and reporting and recordkeeping requirements. We refer readers to the August 30, 2002 final rule for a comprehensive discussion of the research and data that supported the establishment of the LTCH PPS (67 FR 55954). In the June 6, 2003 Federal Register, we published a final rule that set forth the FY 2004 annual update of the payment rates for the Medicare PPS for inpatient hospital services furnished by LTCHs (68 FR 34122). It also changed the annual period for which the payment rates were to be effective, such that the annual updated rates were effective from July 1 through June 30 instead of from October 1 through September 30. We referred to the July through June time period as a ‘‘longterm care hospital rate year’’ (LTCH PPS rate year). In addition, we changed the publication schedule for the annual update to allow for an effective date of July 1. The payment amounts and factors used to determine the annual update of the LTCH PPS Federal rate are based on a LTCH PPS rate year. 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51734 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 relative weights now occur on the same schedule and appear in the same publication. As a result, the updates to the rates and the relative 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 (c)(2) of Public Law 110–173 focused on providing 3 years of relief for certain LTCHs from the percentage threshold 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 (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 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 Public Law 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 (74 FR 43990 through 43992), we implemented the provisions of section 4302 of Public Law 111–5 through an interim final rule with PO 00000 Frm 00260 Fmt 4701 Sfmt 4700 comment period. We received one timely comment 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 addressed this public comment and finalized the interim final rule with comment period in section VII.E. of the preamble of the FY 2011 IPPS/LTCH PPS final rule (75 FR 50399). As discussed in the FY 2011 IPPS/ LTCH PPS final rule, a number of the provisions of the Affordable Care Act affected the policies, payment rates and factors under the LTCH PPS. Specifically, 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. 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 50387 through 50390). 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. As discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50399 through 50400), sections 3106 and 10312 of the Affordable Care Act, which amended sections 114(c) and E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations (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.’’ Therefore, the Secretary will not apply this SSO payment adjustment for the 5year period beginning on the date of enactment of MMSEA (December 29, 2007). • 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. • 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. • 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. 2. Criteria for Classification as a LTCH mstockstill on DSK4VPTVN1PROD with RULES2 a. Classification as a LTCH Under the existing regulations at § 412.23(e)(1) and (e)(2)(i), which implement section 1886(d)(1)(B)(iv)(I) of the Act, to qualify to be paid under the LTCH PPS, a hospital must have a provider agreement with Medicare and must have an average Medicare inpatient length of stay (LOS) of greater than 25 days. Alternatively, § 412.23(e)(2)(ii) states that for cost reporting periods beginning on or after August 5, 1997, a hospital that was first excluded from the PPS in 1986 and can demonstrate that at least 80 percent of VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 charge the beneficiary for services delivered on those uncovered days (§ 412.507). PO 00000 Frm 00261 Fmt 4701 Sfmt 4700 51735 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 for FY 2012 1. Background Section 123 of the BBRA requires that the Secretary implement a PPS for LTCHs (that is, a per discharge system with a diagnosis-related group (DRG)based patient classification system reflecting the differences in patient resources and costs). Section 307(b)(1) of the BIPA modified the requirements of section 123 of the BBRA by requiring that the Secretary examine ‘‘the feasibility and the impact of basing payment under such a system [the longterm care hospital (LTCH) PPS] on the use of existing (or refined) hospital DRGs that have been modified to account for different resource use of LTCH patients, as well as the use of the most recently available hospital discharge data.’’ When the LTCH PPS was implemented for cost reporting periods beginning on or after October 1, 2002, we adopted the same DRG patient classification system (that is, the CMS DRGs) that was utilized at that time E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51736 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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). The MS–DRG classifications are updated annually. As described in section II.G. of this preamble, for FY 2012, we are deleting one MS–DRG and creating two new MS–DRGs for a net gain of one MS– DRG. With these adopted changes, we have a total of 751 MS–DRG groupings for FY 2012. Consistent with section 123 of the BBRA, as amended by section VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 307(b)(1) of the BIPA, and § 412.515 of the regulations, 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 length of stay at the LTCH is less than or equal to five-sixths of the geometric average length of stay for the MS–LTC–DRG). Furthermore, we made 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 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 LTCH PPS as MS–LTC–DRGs although they are structurally identical to the MS–DRGs used under the IPPS. PO 00000 Frm 00262 Fmt 4701 Sfmt 4700 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. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50127), we established that, for claims submitted on the 5010 format beginning January 1, 2011, we would increase the capacity to process diagnosis and procedure codes up to 25 diagnoses and 25 procedures. This includes one principal diagnosis and up to 24 secondary diagnoses for severity of illness determinations. We refer readers to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS final rule for a complete discussion of this change (75 FR 50127). Upon the discharge of the patient from a LTCH, the LTCH must assign appropriate diagnosis and procedure codes from the most current version of the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9–CM). HIPAA Transactions and Code Sets Standards regulations at 45 CFR Parts 160 and 162 require that no later than October 16, 2003, all covered entities must comply with the applicable requirements of Subparts A and I through R of Part 162. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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.13. 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 the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50122 through 50127) and in section III.G.13 of this final rule, 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.13. of this preamble for additional information on the adoption of the ICD–10–CM and ICD–10–PCS systems. 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). VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Medicare contractors (that is, fiscal intermediaries and MACs) enter the clinical and demographic information submitted by LTCHs into their claims processing systems and subject this information to a series of automated screening processes called the Medicare Code Editor (MCE). These screens are designed to identify cases that require further review before assignment into a MS–LTC–DRG can be made. During this process, 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 2012 As specified by our regulations at § 412.517(a), which requires that the MS–LTC–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, as we proposed, we are updating the MS– LTC–DRG classifications effective October 1, 2011, through September 30, 2012 (FY 2012) consistent with the changes to specific MS–DRG classifications presented in section II.G. of this final rule (that is, GROUPER PO 00000 Frm 00263 Fmt 4701 Sfmt 4700 51737 Version 29.0). Therefore, the MS–LTC– DRGs for FY 2012 presented in this final rule are the same as the MS–DRGs that are being used under the IPPS for FY 2012. In addition, because the MS–LTC– DRGs for FY 2012 are the same as the MS–DRGs for FY 2012, the other changes that affect MS–DRG (and by extension MS–LTC–DRG) assignments under Version 29.0 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, also are applicable under the LTCH PPS for FY 2012. 3. Development of the FY 2012 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)), as we proposed, the basic methodology for developing the FY 2012 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 calculated a relative weight for each MS–LTC–DRG that represents the resources needed by an average E:\FR\FM\18AUR2.SGM 18AUR2 51738 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations inpatient LTCH case in that MS–LTC– DRG. For example, cases in a MS–LTC– DRG with a relative weight of 2 will, on average, cost twice as much to treat as cases in a MS–LTC–DRG with a relative weight of 1. mstockstill on DSK4VPTVN1PROD with RULES2 b. Development of the MS–LTC–DRG Relative Weights for FY 2012 Beginning with the FY 2008 update, we established a budget neutrality 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 (72 FR 26882 through 26884)). Consistent with § 412.517(b) and as we proposed, we applied 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).) Thus, for this final rule, the annual update to the MS–LTC– DRG classifications and relative weights for FY 2012 are based on the FY 2011 MS–LTC–DRG classifications and relative weights established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50613 through 50627). c. Data In this final rule, to calculate the MS– LTC–DRG relative weights for FY 2012, we obtained total charges from FY 2010 Medicare LTCH bill data from the March 2011 update of the FY 2010 MedPAR file, which are the best available data at this time, and used the Version 29.0 of the GROUPER to classify LTCH cases. For the proposed rule, we obtained total charges from FY 2010 Medicare LTCH bill data from the December 2010 update of the FY 2010 MedPAR file, which were the best available data at that time, and used the proposed Version 29.0 of the GROUPER to classify LTCH cases. Consistent with our historical policy, we also proposed to use more recent data if available and the final version of the GROUPER to develop the FY 2012 MS–LTC–DRG relative weights for the final rule. (76 FR 25976) Consistent with our historical methodology and as we proposed, we excluded the data from LTCHs that are all-inclusive rate providers and LTCHs that are reimbursed in accordance with VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 and as we proposed, we continued 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 removed 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). Therefore, in the development of the FY 2012 MS–LTC–DRG relative weights in this final rule, we excluded the data of 14 all-inclusive rate providers and the 2 LTCHs that are paid in accordance with demonstration projects that had claims in the March 2011 update of the FY 2010 MedPAR file, as well as any Medicare Advantage claims. 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 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. As we proposed, 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, we used a hospitalspecific relative value (HSRV) methodology to calculate the MS–LTC– DRG relative weights for FY 2012. We believe this method removes this hospital-specific source of bias in measuring LTCH average charges (67 FR 55985). Specifically, we reduced the impact of the variation in charges across providers on any particular proposed MS–LTC–DRG relative weight by converting each LTCH’s charge for a case to a relative value based on that LTCH’s average charge. Under the HSRV methodology, we standardize charges for each LTCH by converting its charges for each case to hospital-specific relative charge values and then adjust those values for the LTCH’s case-mix. The adjustment for case-mix is needed to rescale the PO 00000 Frm 00264 Fmt 4701 Sfmt 4700 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 standardized charges for each case by first dividing the adjusted charge for the case (adjusted for SSOs under § 412.529 as described below 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 the resulting ratio by the LTCH’s case-mix index accounts for the fact that the same relative charges are given greater weight at a LTCH with higher average costs than they would at a LTCH with low average costs, which is needed to adjust each LTCH’s relative charge value to reflect its case-mix relative to the average case-mix for all LTCHs. Because we standardize charges in this manner, we count charges for a Medicare patient at a LTCH with high average charges as less resource intensive than they would be at a LTCH with low average charges. For example, a $10,000 charge for a case at a LTCH with an average adjusted charge of $17,500 reflects a higher level of relative resource use than a $10,000 charge for a case at a LTCH with the same casemix, 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. e. Treatment of Severity Levels in Developing the MS–LTC–DRG Relative Weights For purposes of determining the MS– LTC–DRG relative weights, under our historical methodology, there are three E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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). In this final rule, as we proposed, we utilized these same three categories of MS–LTC–DRGs for purposes of determining the MS–LTC– DRG relative weights for FY 2012. (We provide in-depth discussions of our policy regarding weight-setting for lowvolume MS–LTC–DRGs in section VII.B.3.f. of the preamble of this final rule and for no-volume 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 and as we proposed, we used the following steps to determine the FY 2012 MS– LTC–DRG relative weights: (1) If an MS– LTC–DRG had at least 25 cases, it was assigned its own relative weight; (2) if an MS–LTC–DRG had between 1 and 24 cases, it was assigned to a quintile for which we computed a relative weight for all of the MS–LTC–DRGs assigned to that quintile; and (3) if an MS–LTC– DRG had no cases, it was 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 2012 MS–LTC–DRG relative weights, when necessary, we make 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). VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 FY 2012 MS–LTC–DRG relative weights, we employ the quintile methodology for low-volume MS–LTC– DRGs, such that we group those ‘‘lowvolume 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 2012 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 2011 update of the FY 2010 MedPAR file, we identified 277 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 55 MS–LTC–DRGs (277/ 5 = 55 with 2 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– 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 is 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 2 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 55th) of low-volume MS–LTC–DRGs (with the lowest average charge) into Quintile 1. The MS–LTC– DRGs with the highest average charge cases would be assigned into Quintile 5. Because the average charge of the 166th low-volume MS–LTC–DRG in the sorted list is closer to the average charge of the 165th low-volume MS–LTC–DRG (assigned to Quintile 3) than to the average charge of the 167th low-volume MS–LTC–DRG (assigned to Quintile 4), we assign it to Quintile 3 (such that PO 00000 Frm 00265 Fmt 4701 Sfmt 4700 51739 Quintile 3 contains 56 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 3 of the 5 low-volume quintiles contain 55 MS–LTC–DRGs (Quintiles 1, 2, and 4) and the other 2 low-volume quintiles contain 56 MS–LTC–DRGs (Quintiles 3 and 5). Table 13A, which is listed in section VI. of the Addendum to this final rule and is available via the Internet, lists the composition of the low-volume quintiles for MS–LTC– DRGs for FY 2012. Accordingly, in order to determine the FY 2012 relative weights for the MS–LTC–DRGs with low volume, as we proposed, we used the 5 low-volume quintiles described above. The composition of each of the 5 lowvolume quintiles shown in Table 13A (listed in section VI. of the Addendum to this final rule and available via the Internet) was used in determining the FY 2012 MS–LTC–DRG relative weights (as shown in Table 11 listed in section VI. of the Addendum to this final rule and available via the Internet). 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 made up an individual low-volume quintile. We note that, as this system is dynamic, it is possible that the number and specific type of MS–LTC–DRGs with a low volume of LTCH cases will vary in the future. We use the most recent available claims data in the MedPAR file to identify low-volume MS–LTC–DRGs and to calculate the relative weights based on our methodology. 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 2012 MS–LTC–DRG Relative Weights In the proposed rule, we proposed, in general, to determine the FY 2012 MS– LTC–DRG relative weights based on our existing methodology. (For additional information on the original development of this methodology, and modifications to it since the adoption of E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51740 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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).) Comment: One commenter expressed concern that the inclusion of the ‘‘lowvolume’’ MS–LTC–DRGs (MS–LTC– DRGs with between 1 and 24 cases in the data used to determine the relative weights) and the ‘‘no volume’’ MS– LTC–DRGs (MS–LTC–DRGs that have no LTCH cases in the data used to determine the relative weights) may inappropriately skew the relative weights. Based on the data from the proposed rule, there were 280 ‘‘lowvolume’’ MS–LTC–DRGs and 237 ‘‘no volume’’ MS–LTC–DRGs, which represents approximately 68 percent of the 751 MS–LTC–DRGs proposed for FY 2012. The commenter stated that even though approximately 69 percent of the proposed MS–LTC–DRGs have few or no cases, they are still included in the relative weight calculations, and therefore may not accurately reflect the utilization of LTCH services. Response: The commenter may find it helpful to review our detailed explanation of the application of the MS–DRG patient classification system used by the IPPS to the LTCH PPS, which required the establishment of the categories of ‘‘no-volume’’ and ‘‘low volume’’ MS–LTC–DRGs because LTCHs do not treat the full range of patients treated in IPPS hospitals (67 FR 55983 through 55995). We believe that the commenter may not fully understand how ‘‘low-volume’’ MS– LTC–DRGs and ‘‘no volume’’ MS–LTC– DRGs are treated in our relative weight methodology. The MS–LTC–DRG relative weights are determined based on the ratio of the estimated cost of the cases assigned to each MS–LTC–DRG (as proxied by total charges from the claims in the MedPAR data) to the cost of the all of the LTCH cases (for all MS– LTC–DRGs) in the database. Although the ‘‘low-volume’’ MS–LTC–DRGs represent approximately 37 percent of the 751 MS–LTC–DRGs proposed for FY 2012, the cases assigned to those the ‘‘low-volume’’ MS–LTC–DRGs only represented approximately 1.5 percent of the LTCH cases used to calculate the proposed relative weights. Similarly, while the ‘‘no-volume’’ MS–LTC–DRGs represent approximately 32 percent of the 751 MS–LTC–DRGs proposed for FY 2012, there were no cases assigned to the ‘‘no-volume’’ MS–LTC–DRGs, and therefore, no data from any claims for those MS–LTC–DRGs was used to determine the proposed relative weights. As described in greater detail below in section VII.B.3.g. (step 5) of VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 this preamble, the relative weights for the ‘‘no-volume’’ MS–LTC–DRGs are assigned based on clinical similarity and relative costliness, and therefore, have no effect on the calculation of the relative weights. For the reasons discussed above, we do not believe that inclusion of the ‘‘low-volume’’ MS–LTC–DRGs and the ‘‘no volume’’ MS–LTC–DRGs inappropriately skew the calculation of the relative weights such that the data do not accurately reflect the utilization of LTCH services. We continue to believe that our methodology for determining the relative weights for each MS–LTC–DRG appropriately account for the variations in cost per discharge and resource utilization among the payment groups in accordance with § 412.515. Therefore, in this final rule, we are adopting our proposed methodology as final without modification. In summary, for FY 2012, to determine the FY 2012 MS–LTC–DRG relative weights, we grouped LTCH cases to the appropriate MS–LTC–DRG, while taking into account the lowvolume quintile (as described above). After grouping the cases to the appropriate MS–LTC–DRG (or lowvolume quintile), we calculated the FY 2012 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 below). After removing statistical outliers (step 1 below) and cases with a length of stay of 7 days or less (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 2012 MS–LTC– DRG relative weights. We note that, as we stated in section VII.B.3.c. of this preamble, we excluded the data of allinclusive rate LTCHs, LTCHs that are paid in accordance with demonstration projects, and any Medicare Advantage claims in the March 2011 update of the FY 2010 MedPAR file. Step 1—Remove statistical outliers. The first step in the calculation of the FY 2012 MS–LTC–DRG relative weights is to remove statistical outlier cases. Consistent with our historical relative weight methodology, we 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 were removed prior to PO 00000 Frm 00266 Fmt 4701 Sfmt 4700 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 proposed relative weights could result in an inaccurate relative weight 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 2012 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 2012 MS–LTC–DRG relative weights, 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 were left with cases that have a length of stay of greater than or equal to 8 days. As the next step in the calculation of the FY 2012 MS– LTC–DRG relative weights, consistent with our historical relative weight methodology, 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 made 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 FY 2012 MS–LTC–DRG relative weights would lower the FY 2012 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, we adjusted 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 2012 MS– LTC–DRG relative weights on an iterative basis. Consistent with our historical relative weight methodology, we calculated the FY 2012 MS–LTC–DRG relative weights using the HSRV methodology, which is an iterative process. First, for each LTCH case, we calculated 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 was 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 was used for each LTCH. For each MS–LTC–DRG, we calculated the FY 2012 relative weight by dividing the average of the 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’ hospital-specific relative charge values above were multiplied by these hospital-specific case-mix indexes. These hospital-specific case-mix adjusted relative charge values were then used to calculate a new set of MS– VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 2012 relative weight for MS–LTC–DRGs with no LTCH cases. As we stated above, we determined the FY 2012 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 2011 update of the FY 2010 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 2010 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, 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 2012 relative weights for the MS–LTC–DRGs with no LTCH cases in the March 2011 update of the FY 2010 MedPAR file used in this final rule (that is, ‘‘novolume’’ MS–LTC–DRGs) by crosswalking each no-volume MS–LTC–DRG to another MS–LTC–DRG with a calculated relative weight (determined in accordance with the methodology described above). Then, the ‘‘novolume’’ 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 751 MS–LTC–DRGs for FY 2012, we identified 236 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, we assigned relative weights for each of the 236 no-volume MS–LTC– PO 00000 Frm 00267 Fmt 4701 Sfmt 4700 51741 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 515 (751 ¥ 236 = 515) MS–LTC–DRGs for which we were able to determine relative weights based on FY 2010 LTCH claims data using the steps described above. (For the remainder of this discussion, we refer to the ‘‘cross-walked’’ MS–LTC–DRGs as the MS–LTC–DRGs to which we crosswalked one of the 236 ‘‘no volume’’ MS–LTC–DRGs for purposes of determining a relative weight.) Then, we assigned the no-volume 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, as we proposed, we crosswalked the no-volume MS–LTC– DRG to an MS–LTC–DRG for which there were LTCH cases in the March 2011 update of the FY 2010 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 weight for the no-volume MS–LTC–DRGs in FY 2012. (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 2012, the relative weights assigned based on the cross-walked 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 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 2012. 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– E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51742 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations LTC–DRG as well. Similarly, if the MS– LTC–DRG to which the no-volume MS– LTC–DRG was 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 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 2012. (As we noted above, in the infrequent case where nonmonotonicity involving a novolume MS–LTC–DRG results, additional adjustments as described in Step 6 were 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 was cross-walked (that is, the cross-walked MS–LTC– DRG) for FY 2012 is shown in Table 13B, which is listed in section VI. of the Addendum to this final rule and is available via the Internet. To illustrate this methodology for determining the relative weights for the FY 2012 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 2012 provided in Table 13B. Example: There were no cases in the FY 2010 MedPAR file used for this 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 based on resource use to MS–LTC–DRG 61. Therefore, we assigned the same relative weight of MS–LTC–DRG 70 of 0.8072 for FY 2012 to MS–LTC–DRG 61 (Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the Internet). Again, we note that, as this system is dynamic, it is entirely possible that the number of MS–LTC–DRGs with no volume of LTCH cases based on the system will vary in the future. We used the most recent available claims data in the MedPAR file to identify no-volume MS–LTC–DRGs and to determine the relative weights in this final rule. Furthermore, for FY 2012, consistent with our historical relative weight methodology, 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 2012 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. 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 increases (that is, if PO 00000 Frm 00268 Fmt 4701 Sfmt 4700 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 2012 MS–LTC–DRG relative weights in this final rule, consistent with our historical methodology 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 2012 MS–LTC–DRG relative weights in this final rule by applying this methodology are denoted in Table 11, which is listed in section VI. of the Addendum to this final rule and is available via the Internet. Step 7—Calculate the FY 2012 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 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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, we updated the MS–LTC–DRG classifications and relative weights for FY 2012 based on the most recent available LTCH data, and to apply a budget neutrality adjustment in determining the FY 2012 MS–LTC–DRG relative weights. To ensure budget neutrality in the update to the MS–LTC–DRG classifications and relative weights under § 412.517(b), we used our established two-step budget neutrality methodology. In this final rule, in the first step of our MS–LTC–DRG budget neutrality methodology, for FY 2012, 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 were 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 2012 (the first step of our budget neutrality methodology), in this final rule, as we proposed, we used the following three steps: (1.a.) we used the most recent available LTCH claims data (FY 2010) and grouped them using the FY 2012 GROUPER (Version 29.0) and the recalibrated FY 2012 MS–LTC–DRG relative weights (determined in steps 1 through 6 of the Steps for Determining the FY 2012 MS–LTC–DRG Relative Weights above) to calculate the average CMI; (1.b.) we grouped the same LTCH claims data (FY 2010) using the FY 2011 GROUPER (Version 28.0) and FY 2011 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 2011 (determined in Step 1.b.) by the average CMI for FY 2012 (determined in step 1.a.). In determining the MS–LTC– DRG relative weights for FY 2012, each recalibrated MS–LTC–DRG relative weight was multiplied by 1.11520 in the first step of the budget neutrality methodology, which produced ‘‘normalized relative weights.’’ VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 2012 MS–LTC–DRG classifications and relative weights) are equal to estimated aggregate LTCH PPS payments before reclassification and recalibration (that is, the FY 2011 MS– LTC–DRG classifications and relative weights). Accordingly, consistent with our existing methodology, we used FY 2010 discharge data to simulate payments and compare estimated aggregate LTCH PPS payments using the FY 2011 MS–LTC–DRGs and relative weights to estimate aggregate LTCH PPS payments using the FY 2012 MS–LTC– DRGs and relative weights. Furthermore, consistent with our historical policy of using the best available data, we also used updated data to determine the budget neutrality adjustment factor for FY 2012 in the final rule. For this final rule, as we proposed, we determined the FY 2012 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 2012 and GROUPER Version 29.0 (as described above); (2.b.) we simulated estimated total LTCH PPS payments using the FY 2011 GROUPER (Version 28.0) and the FY 2011 MS– LTC–DRG relative weights shown in Table 11 of the FY 2011 IPPS/LTCH PPS final rule (75 FR 50613 through 50626); 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 2011 GROUPER (Version 28.0) and the FY 2011 MS–LTC–DRG relative weights (determined in step 2.b.) by the estimated total LTCH PPS payments using the FY 2012 GROUPER (Version 29.0) and the normalized MS–LTC–DRG relative weights for FY 2012 (determined in Step 2.a.). In determining the FY 2012 MS–LTC–DRG relative weights, each normalized relative weight was multiplied by a budget neutrality factor of 0.994649 in the second step of the budget neutrality methodology to determine the budget neutral FY 2012 relative weight for each MS–LTC–DRG. Accordingly, in determining the FY 2012 MS–LTC–DRG relative weights in this final rule, consistent with our existing methodology, we applied a normalization factor of 1.11520 and a budget neutrality factor of 0.994649 (computed as described above). Table PO 00000 Frm 00269 Fmt 4701 Sfmt 4700 51743 11, which is listed in section VI. of the Addendum to this final rule and is available via the Internet, 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 § 412.529) for FY 2012. The FY 2012 MS–LTC–DRG relative weights in Table 11, which is listed in section VI. of the Addendum to this final rule and available via the Internet, reflect both the normalization factor of 1.11520 and the budget neutrality factor of 0.994649. C. Quality Reporting Program for LTCHs 1. Background and Statutory Authority CMS seeks to promote higher quality and more efficient health care for Medicare beneficiaries, and our efforts are furthered by quality reporting programs coupled with public reporting of that information. Such quality reporting programs already exist for various settings such as hospital inpatient services via the Hospital Inpatient Quality Reporting (IQR) Program (formerly called the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program), hospital outpatient services via the Hospital Outpatient Quality Reporting (OQR) Program (formerly called the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) and physicians’ and other eligible professionals’ services via the Physician Quality Reporting System (formerly called the Physician Quality Reporting Initiative, or PQRI). We have also implemented quality reporting programs for home health agencies and skilled nursing facilities that are based on conditions of participation, and an endstage renal disease quality incentive program (ESRD QIP) that links payment to performance. Section 3004(a) of the Affordable Care Act authorizes an additional quality reporting program for LTCHs, by adding a new paragraph (5) to section 1886(m) of the Act. Section 1886(m)(5)(A)(i) of the Act requires that, for rate year 2014 and each subsequent rate year, the Secretary shall reduce any annual update to the standard Federal rate for discharges occurring during such rate year, by 2 percentage points for any LTCH that does not comply with quality data submission requirements with respect to an applicable rate year. We note that section 1886(m)(5) of the Act uses the term ‘‘rate year.’’ 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51744 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Federal payment rates with the annual update of the MS–LTC–DRG classifications and relative weights so that the annual updates to the rates and factors have an October 1 effective date and occur on the same schedule. 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). Beginning October 1, 2010, we changed from using the term ‘‘rate year’’ to ‘‘fiscal year’’ under the LTCH PPS in order to conform to the standard definition of the Federal fiscal year (October 1 through September 30). For LTCH PPS purposes, the term ‘‘rate year’’ and the term ‘‘fiscal year’’ both refer to the time period beginning October 1 and ending September 30. For more information regarding this terminology change, we refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50396 and 50397). For purposes of the discussion below, in order to eliminate any possible confusion that may be caused by using the term ‘‘rate year’’ with respect to the LTCH quality reporting program, we will use the term ‘‘fiscal year’’ rather than ‘‘rate year.’’ As provided at section 1886(m)(5)(A)(ii) of the Act, depending on the amount of the annual update for a particular year, a reduction of 2.0 percentage points may result in the annual update being less than 0.0 percent for a fiscal year and may result in payment rates under the LTCH PPS being less than payment rates for the preceding fiscal year. In addition, as set forth at section 1886(m)(5)(B) of the Act, any reduction based on failure to comply with the reporting requirements, as required by section 1886(m)(5)(A) of the Act, shall apply only with respect to the particular fiscal year involved, and any such reduction shall not be taken into account in computing the payment rate for subsequent fiscal years. Section 1886(m)(5)(C) of the Act requires that, for fiscal year 2014 and each subsequent fiscal year, each LTCH shall submit to the Secretary data on quality measures as specified by the Secretary. Such data must be submitted in a form and manner, and at a time, specified by the Secretary. Generally, any measures selected by the Secretary must have been endorsed by the entity with a contract under section 1890(a) of the Act. This contract is currently held by the NQF. The NQF is a voluntary consensus standard-setting organization with a diverse representation of consumer, purchaser, provider, academic, clinical, and other health care VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 in our reporting programs. However, section 1886(m)(5)(D)(ii) of the Act provides that, 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 entity with a contract under section 1890(a) of the Act (currently NQF), the Secretary may specify a measure(s) that is (are) not so endorsed, as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. Under section 1886(m)(5)(D)(iii) of the Act, the Secretary shall publish, by no later than October 1, 2012, measures which shall be applicable with respect to the FY 2014 payment determination. Section 1886(m)(5)(E) of the Act requires the Secretary to establish procedures for making data submitted under the LTCH quality reporting program available to the public. The Secretary must ensure that each LTCH has the opportunity to review the data that are to be made public with respect to that facility prior to such data being made public. The Secretary must also report quality measures that relate to services furnished in LTCHs on the CMS Web site. 2. Quality Measures for the LTCH Quality Reporting Program for FY 2014 a. Considerations in the Selection of the Quality Measures In implementing the LTCH quality reporting program, we believe that the development of a quality reporting program that is successful in promoting the delivery of high quality health care services in LTCHs is of paramount importance. As the statute provides in section 1886(m)(5)(D) of the Act, in establishing the LTCH quality reporting program, we must publish quality measures to be reported with respect to the FY 2014 payment determination no later than October 1, 2012. In order to meet that mandate, we sought to develop a quality reporting program that incorporates overarching health care aims and goals intended to facilitate quality care in a manner that is effective and meaningful, while remaining mindful of reporting burden and feasibility of data collection by LTCHs, in order to reduce and avoid duplicative reporting efforts when possible. We seek to efficiently collect information on PO 00000 Frm 00270 Fmt 4701 Sfmt 4700 valid, reliable, and relevant measures of quality and to share this information with the public, as provided under section 1886(m)(5)(E) of the Act. Several provisions of the Affordable Care Act, taken together, direct the Secretary to establish a national strategy to provide a comprehensive plan and priorities to improve the delivery of health care services, patient health outcomes, and population health through a transparent, collaborative process. This strategy, the National Quality Strategy, was released by the Secretary (available on the Web site at: https://www.healthcare.gov/center/ reports/quality03212011a.html#es). We have used the priorities of the National Quality Strategy to guide identification of the proposed quality measures for LTCHs under section 1886(m)(5) of the Act. We also applied the following additional considerations and criteria in selecting the quality measures for LTCHs: whether a measure is included in, or facilitates alignment with, other Medicare and Medicaid programs; whether a measure addresses HHS priorities, such as prevention, care of chronic illness, high prevalence conditions, patient safety, patient and caregiver engagement, and care coordination; and whether a measure is evidence-based and may drive quality improvement as well as has a low probability of causing unintended adverse consequences, such as reduced LTCH admissions of higher risk patients. Furthermore, at the Listening Session held on November 15, 2010, for the Affordable Care Act section 3004 quality reporting programs, we sought input, and invited comments and suggestions regarding quality reporting, quality measurement recommendations, prioritization, and feasibility. We sought additional input at a Special Open Door Forum held on December 16, 2010, for the Affordable Care Act section 3004 quality reporting programs. Transcripts for both the Listening Session and the Open Door Forum can be found on the CMS Web site at: https://www.cms.gov/ LTCH-IRF-Hospice-Quality-Reporting. In addition, we invited suggestions and input regarding the section 3004 quality reporting programs to be sent to us using the CMS Web site mail box LTCH-IRF-Hospice-Quality-Reporting Comments@cms.hhs.gov found at https:// www.cms.gov/LTCH-IRF-HospiceQuality-Reporting. We also received suggestions and input from a LTCH technical expert panel (TEP), convened by the CMS measure development contractor on January 31, 2011, that reviewed and prioritized the quality E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 measures identified by a LTCH environmental scan led by a CMS measure development contractor, Research Triangle Institute (RTI International), specifically for the LTCH quality reporting program. Specifically, this TEP reviewed measures found in the environmental scan and rated them for importance, scientific soundness, usability, and feasibility. In summary, in selecting the quality measures discussed below, with applicability for FY 2014 and subsequent years, our goal is to achieve several objectives. First, the measures should relate to the general aims of better care for the individual, better population health, and lower cost through better quality. Second, the measures should promote improved quality specifically with regard to the priorities that are of most relevance to LTCHs. These include: patient safety, such as avoiding healthcare-associated infections (HAIs) and adverse events; better coordination of care; and personcentered and family-centered care. Third, the measures should address improved quality for the primary role of LTCHs, which is to furnish extended medical care to individuals with clinically complex problems, such as multiple acute or chronic conditions, that need hospital-level care for relatively extended periods of greater than 25 days. b. LTCH Quality Measures for the FY 2014 Payment Determination In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25983), we proposed that, for the FY 2014 payment determination, LTCHs submit data on three quality measures: (1) Urinary Catheter-Associated Urinary Tract Infections (CAUTI); (2) Central Line Catheter-Associated Bloodstream Infection (CLABSI); and (3) Pressure Ulcers that are New or Have Worsened. HAIs are a topic area widely acknowledged by HHS in the HHS Action Plan to Prevent HAIs (https:// www.hhs.gov/ash/initiatives/hai/ actionplan/), the Institute of Medicine, the National Priorities Partnership, and others as a high impact priority requiring measurement and improvement. Better care is one of the aims found in the National Quality Strategy, and patient safety is one of the priorities. Mitigating HAIs is essential in the improvement of patient safety, and, therefore, patient care. HAIs are among the leading causes of death in the United States and, therefore, are serious reportable events. CDC estimates that as many as 2 million infections are acquired each year in hospitals and result in approximately 90,000 deaths VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 per year.58 HAIs not only put the patient at risk, but also increase the days of hospitalization required for patients and add considerable health care costs. Therefore, two of the three proposed quality measures, CAUTI and CLABSI, are HAI measures. Other HAIs included in the HHS Action Plan to Prevent HAIs were under consideration for the LTCH quality reporting program beginning October 1, 2012. However, the TEP convened by the measure development contractor recommended the two infection events, urinary catheter-associated urinary tract infection and central line catheterassociated bloodstream infection (each an episode of an infection, such as CAUTI or CLABSI) as highly pertinent, and important for data collection as well as most ready and currently feasible for implementation in the LTCH setting. HAI quality measures are important for quality reporting, and we intend to propose additional HAI measures included in the HHS HAI Action Plan to Prevent HAIs through future rulemaking. These potential HAI quality measures are listed in our discussion of possible measures under consideration for future years. In the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 25983 through 25985), we proposed the selection of the CAUTI and CAUTI events as the two initial HAI quality measures for the LTCH quality measure reporting program. (1) FY 2014 LTCH Measure #1: Urinary Catheter-Associated Urinary Tract Infections (CAUTI) The first measure we proposed for LTCHs for purposes of the FY 2014 payment determination is an application of the NQF-endorsed measure developed by CDC for hospital intensive care units (ICU) entitled (NQF #0138) ‘‘Urinary Catheter-Associated Urinary Tract Infection [CAUTI] rate per 1,000 urinary catheter days, for Intensive Care Unit Patients’’ to all LTCH care units. This measure was developed by the CDC to measure the percentage of patients with CAUTIs in the ICU context. At the time we developed the proposed rule, the measure we proposed to apply, NQF #0138, was undergoing measure maintenance review by NQF. We indicated that this review may result in a change in how the CDC calculates the aggregated data from using a rate for CAUTI, to the use of a standardized infection ratio (SIR) of healthcare 58 McKibben L; Horan T: Guidance on public reporting of healthcare-associated infections: Recommendations of the Healthcare Infection Control Practices Advisory Committee. AJIC 2005;33:217 through 226. PO 00000 Frm 00271 Fmt 4701 Sfmt 4700 51745 associated catheter-associated urinary tract infections. We proposed to adopt the current measure in this rulemaking cycle. However, we also indicated that we intend to propose the adoption of any modifications to this measure that may result from the NQF review process in future rulemaking. While it is fast becoming a medical best practice to avoid urinary catheter use whenever possible, this may not always be possible with the LTCH patient population, due to the severity of their primary illnesses as well as comorbidities. Patients who are exposed to indwelling urinary catheters have a significantly higher risk of developing urinary tract infections (UTIs). UTIs are a common cause of morbidity and mortality. The HHS Action Plan to Prevent HAIs identified catheter associated urinary tract infections as the leading type of HAI that is largely preventable, and the occurrence of which can be drastically reduced in order to reduce adverse health care related events and avoid excess costs. The urinary tract is the most common site of HAI, accounting for more than 30 percent of infections reported by acute care hospitals.59 Healthcare-associated UTIs are commonly attributed to catheterization of the urinary tract. CAUTI can lead to such complications as cystitis, pyelonephritis, gram-negative bacteremia, prostatitis, epididymitis, and orchitis in males and, less commonly, endocarditis, vertebral osteomyelitis, septic arthritis, endophthalmitis, and meningitis in all patients. Complications associated with CAUTI also include discomfort to the patient, prolonged hospital stay, and increased cost and mortality. Each year, more than 13,000 deaths are associated with UTIs.2 Prevention of CAUTIs is discussed in the CDC/HICPAC document, Guideline for Prevention of Catheter-associated Urinary Tract Infections.60 The NQF-endorsed CAUTI measure we proposed is currently collected by the CDC via the National Healthcare Safety Network (NHSN) as part of Statemandated reporting and surveillance requirements for hospitals. CDC’s NHSN is a secure Internet-based surveillance system that currently has data collection forms and data submission and reporting mechanism in place for 59 Klevens RM, Edward JR, et al. Estimating health care-associated infections and deaths in U.S. hospitals, 2002. Public Health Reports 2007;122:160–166. 60 Wong ES. Guideline for prevention of catheterassociated urinary tract infections. Infect Control 1981;2:126–30. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51746 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations LTCHs. NHSN is currently used, in part, as one means by which certain Statemandated reporting and surveillance data are collected. We recognize that the NQF has endorsed this measure for the short term, acute care ICU setting, but believe that this measure is highly relevant to LTCHs, in that urinary catheters are commonly used in the LTCH care setting. As previously noted, NQF #0138 is undergoing measure maintenance review by NQF. This review may result in a change in how CDC calculates the aggregated data from using a rate for CAUTI to the use of a SIR. We proposed to adopt the current measure in this rulemaking cycle. However, we indicated that we intend to propose the adoption of any modifications to this measure that may result from the NQF review process in future rulemaking. The TEP convened by the our measure development contractor on January 31, 2011, identified CAUTI as a high priority quality issue for LTCHs, and there was agreement by this TEP that this particular infection rate is worthy of surveillance within LTCHs. This measure is applicable for surveillance in long-term care units (CDC/NHSN Manual, Device-Associated Module, CAUTI Event, which is available on the CDC Web site at: https://www.cdc.gov/ nhsn/pdfs/pscManual/ 7pscCAUTIcurrent.pdf. Section 1886(m)(5)(D)(ii) of the Act provides that ‘‘[i]n 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 entity with a contract under section 1890(a) [of the Act], the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ We reviewed the NQF’s consensus-endorsed measures and were unable to identify any NQF-endorsed measures for urinary catheter-associated urinary tract infections for the LTCH setting. We are unaware of any other measures for catheter-associated urinary tract infections that have been approved by voluntary consensus standards bodies and endorsed by NQF. We proposed to adopt an application of this NQF-endorsed (in the short-term acute care ICU setting) measure under the Secretary’s authority to select non-NQFendorsed measures. As previously noted, NQF #0138 is undergoing measure maintenance review by NQF. This review may result in changes to this measure’s specifications in how CDC calculates VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 the aggregated data from using a rate for CAUTI to the use of a SIR. We proposed to adopt the current measure in this rulemaking cycle. However, we indicated that we intend to propose the adoption of any modifications to this measure that may result from the NQF review process in future rulemaking. We note that we intend to ask NQF to formally extend its endorsement of the CAUTI measure to the LTCH setting. We solicited public comment on the proposed quality measure ‘‘Urinary Catheter-Associated Urinary Tract Infections’’ (CAUTI) in the FY 2012 IPPS/LTCH PPS. Comment: The majority of commenters acknowledged that catheter-associated urinary tract infections are an important issue and supported this measure for use in quality measurement and reporting given the clinical severity of some LTCH patients. A few commenters expressed concern related to the clinical relevance, lack of uniformity, and relative usefulness compared to other catheter associated urinary tract infection measures for LTCHs. One commenter believed that no data were provided to support the selection of this HAI for LTCH settings. Response: We appreciate the commenters’ support in the use of this measure. We agree with the importance of catheter associated urinary tract infections. As an HAI, the CDC estimates that there are 449,334 CAUTIs and 13,000 deaths per year with an estimated associated cost of $340,000,000.61 The catheter-associated urinary tract infection is the most common type of HAI, comprising some 30 percent of all HAIs. Furthermore and importantly, as indicated in the HHS National Action Plan to Prevent HAIs (https://www.hhs.gov/ash/initiatives/hai/ actionplan/), catheterassociated urinary tract infection is also a leading type of HAI that is largely preventable.62 With respect to the other urinary tract infection measures referenced, we believe that the commenters are referring to other NQF endorsed measures that are based on urinary tract infections (not catheter-associated) or measured usage of a urinary catheters, not measures of Catheter Associated 61 Scott, RD. The Direct Medical Costs of Healthcare-Associated Infections in U.S. Hospitals and the Benefits of Prevention. March 2009. Available at: https://www.cdc.gov/ncidod/dhqp/pdf/ Scott_CostPaper.pdf. 62 Klevens RM, Edwards JR, Richards CL, Horan TC, Gaynes RP, Pollock DA, Cardo DM. Estimating healthcare-associated infection and deaths in U.S. hospitals, 2002. Public Health Reports 2007: 122:160–166. Available at https://www.cdc.gov/ ncidod/dhqp/pdf/hicpac/infections_deaths.pdf. PO 00000 Frm 00272 Fmt 4701 Sfmt 4700 Urinary Tract Infection. As we have previously stated we are unaware of any other endorsed measure for Urinary Catheter Associated Urinary Tract Infection. As for data in support of the selection of CAUTI for the LTCH setting, each year, more than 13,000 deaths are associated with UTIs.63 Furthermore, CAUTI is included in the HHS National Action Plan to Prevent HAIs. LTCH patients often have medical complexities that necessitate the use of urinary catheters as an integral aspect of a patient’s care, and the use of urinary catheters is common. Additionally, the TEP convened by the CMS measure developer contractor for LTCH measure development identified CAUTI as a high priority issue for LTCHs. Because the use of urinary catheters leads to risk of CAUTI, we believe that the CAUTI measure is appropriate for LTCHs and aligns with HHS priorities to reduce such infections. Comment: Commenters commended the NQF endorsement process and suggested that the LTCH CAUTI measure undergo the same evaluation before being published in the final rule. Many commenters expressed concern that the CAUTI measure is not endorsed by the NQF for the LTCH setting. Some commenters suggested that CMS work with the CDC to test this measure and ‘‘refine the measure’’ prior to finalizing its use. Response: We agree with the value of the NQF endorsement process. We are using the NQF endorsed CAUTI measure for Hospital ICU’s and applying it to the LTCH setting. With regard to the comment that we ‘‘refine the measure’’ prior to the use of this measure, we interpret this to mean to further specify or specify the measure differently for LTCHs. Although the currently NQF endorsed CAUTI measure is not specifically NQFendorsed for the LTCH setting, CAUTI events, from which the measure is calculated, are already being collected by some LTCHs through the use of the NHSN. We intend to use the same measure specifications as endorsed by NQF for Hospital ICUs as for LTCHs and collected through the NHSN. Comment: Several commenters highlighted the need to risk-adjust the CAUTI measure. These commenters stated that some LTCH patients are at much higher risk of developing CAUTI than other lower risk patients. Several commenters expressed concern that lack of risk adjustment could possibly lead to unintended consequences such as reduced access for higher risk patients. 63 See E:\FR\FM\18AUR2.SGM note 2. 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Response: The CAUTI measure as endorsed by NQF does include risk adjustment although not based on individual patient characteristics or comorbidities as suggested by commenters. Rather as endorsed by NQF, the CDC NHSN process uses facility type and location type information for risk adjustment by stratifying the results by facility and location type. The results are then reported as observed over expected based on the expected rate for the facility or location. In this case, measures would be calculated based on the expected rate for LTCHs, according to the data reported to the CDC. This is reported as a Standardized Infection Ratio (SIR). More information about the SIR can be found at the CDC Web site: https://www.cdc.gov/nhsn/PDFs/ pscManual/7pscCAUTIcurrent.pdf. Comment: Some commenters expressed concern with potential erroneous attribution of infections that may have resulted from catheter use in a previous setting. One commenter asked whether quality data related to CAUTI would be collected for all LTCH patients regardless of payer. Response: With respect to erroneous attribution, the CDC’s guidelines for HAI NHSN event reporting include a Transfer Rule. Under the Transfer Rule, CAUTIs that develop within 48 hours of transfer from a patient’s previous patient transferring location to the receiving or admitting location, are not attributable to the admitting patient location, such as the LTCH setting. Therefore such CAUTIs are not included in the admitting LTCH’s HAI event reporting, and are not included in the LTCH’s CAUTI measure. In the HAI NHSN event reporting, admitting and transferring locations are defined using a unit identifier on the CDC’s NSHN. We believe this appropriately addresses the potential risk of erroneous attribution for transferred patients. Additional information related to the ‘‘Transfer Rule’’ can be found on the CDC Web site at: https://www.cdc.gov/ nhsn/PDFs/slides/CAUTI.pdf. As stated in the proposed rule, the reporting of HAI events and meaningful HAI event surveillance by LTCHs using the CDC/NHSN requires the submission of HAI events, regardless of payer. Comment: One commenter expressed concern that patients who were ‘‘colonized’’ with bacteria but without symptoms would be included as CAUTI and therefore opposed use of this measure. Response: We interpret the commenter’s use of the term ‘‘colonized’’ to mean a condition in which significant numbers of bacteria VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 have colonized the urinary tract but there are no signs or symptoms of urinary tract infection. Patients with this condition do not meet CDC’s current criteria for CAUTI. To meet CDC’s criteria, asymptomatic patients must have a bacteremia involving at least one microorganism that is a uropathogen. Please refer to the CDC website for further information https:// www.cdc.gov/nhsn/PDFs/pscManual/ 7pscCAUTIcurrent.pdf After consideration of the public comments we received, we are finalizing the Urinary CatheterAssociated Urinary Tract Infection measure, as proposed, for the FY 2014 payment determination. (2) FY 2014 Measure #2: Central Line Catheter-Associated Bloodstream Infection (CLABSI) The second measure we proposed for LTCHs for the FY 2014 payment determination is an application of a CDC-developed NQF-endorsed measure for hospital ICU and high-risk nursery patients; (NQF #0139) ‘‘Central Line Catheter-Associated Bloodstream Infection (CLABSI) Rate for ICU and High-Risk Nursery (HRN) Patients.’’ This is a measure of the percentage of ICU and high-risk nursery patients who, over a certain amount of days, acquired central line catheter-associated bloodstream infections over a specified number of line days. A central line is a catheter that health care providers often place in a large vein in the neck, chest, or groin to give medication or fluids or to collect blood for medical tests. Many LTCH patients have been discharged from short-term acute care hospital ICUs or ICU stepdown units with these central lines already in place. In other situations, a central line IV may be inserted during the patient’s stay at the LTCH. Bloodstream infections are usually serious infections typically causing a prolongation of hospital stay and increased cost and risk of mortality.64 An estimated 248,000 bloodstream infections occur in U.S. hospitals each year.65 Furthermore, CLABSIs result in thousands of deaths each year and billions of dollars in added costs to the U.S. healthcare system, yet these infections are preventable. The CDC is providing guidelines and tools to the 64 CDC/NHSN Manual. Device-Associated Module, CLABSI Event. Available at https:// www.cdc.gov/nhsn/PDFs/pscManual/ 4PSC_CLABScurrent.pdf, accessed on January 20, 2011. 65 Klevens RM, Edward JR, et al. Estimating health care-associated infections and deaths in U.S. hospitals, 2002. Public Health Reports 2007;122:160–166. PO 00000 Frm 00273 Fmt 4701 Sfmt 4700 51747 health care community to help reduce central line catheter-associated bloodstream infections. Techniques to prevent CLABSI through proper central line management are addressed in CDC’s Healthcare Infection Control Practices Advisory Committee Guidelines for the Prevention of Intravascular Catheter Related Infections.66 We recognize that NQF endorsement of this measure is limited to ICU and HRN patients in hospital settings, but believe that this measure is also highly relevant in the LTCH setting because intravascular, central venous catheters (also known as a ‘‘central line’’) are used frequently due to the fact that these types of hospitals care for patients with complex medical problems which require LTCH stays and intensive treatment. The CMS measure development contractor convened a TEP on January 31, 2011, which identified CLASBIs as a high priority quality issue for LTCHs; there was agreement by the TEP that this particular infection rate is worthy of surveillance within LTCHs. This measure is applicable for surveillance in long-term hospital care units (CDC/ NHSN Manual, Device-Associated Module, CLABSI Event, which is available at the CDC Web site at: https:// www.cdc.gov/nhsn/PDFs/pscManual/ 4PSC_CLABScurrent.pdf). Section 1886(m)(5)(D)(ii) of the Act provides that ‘‘[i]n 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 entity with a contract under section 1890(a) [of the Act], the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ We reviewed the NQF’s consensus-endorsed measures, and were unable to identify any NQF endorsed measures for central line catheterassociated bloodstream infections for the LTCH setting. We are unaware of any other measures for CLABSI that have been approved by voluntary consensus standards bodies and endorsed by NQF. Therefore, we proposed to adopt an application of this NQF-endorsed (for ICU and HRN) measure under the Secretary’s authority provided in section 1886(m)(5)(D)(ii) of the Act. 66 O’Grady NP, Alexander M, Dellinger EP, Gerberding JL, Heard SO, Maki DG, et al. Guidelines for the prevention of intravascular catheter-related infections. MMWR 2002;51(No. RR–10:1–26. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51748 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations We proposed to apply the measure specifications as endorsed by NQF. We also intend to ask NQF to formally extend its endorsement of the CLABSI measure to all care settings within the LTCH (that is, beyond the LTCH ICU). We solicited public comment on the proposed quality measure ‘‘Central Line Catheter-Associated Bloodstream Infection’’ (CLABSI) in the FY 2012 IPPS/LTCH PPS proposed rule for the quality reporting program for LTCHs. Comment: The majority of commenters supported the selection of CLABSI for use in quality measurement and reporting. One commenter believed that, of the three proposed measures, CLABSI is probably the best understood measure, and encouraged its adoption. Other commenters remarked positively on its clinical relevance given the clinical severity of some LTCH patients. However, one commenter questioned the clinical relevance of a CLABSI-based quality measure for LTCHs, and expressed concern that the majority of LTCH patients do not have central lines in LTCHs. Response: We appreciate the commenters’ support for the use the CLABSI measure. We agree with the importance of CLABSIs. Specifically, we believe collecting data on this quality measure is clinically relevant because CLABSIs are preventable, and can lead to poor outcomes such as sepsis and death. Further, as indicated in the HHS National Action Plan to Prevent HAIs (https://www.hhs.gov/ash/initiatives/hai/ actionplan/), CLABSI is a leading type of HAI. We also agree with commenter who stated that CLABSIs are clinically relevant to LTCHs. LTCH patients are often medically complex and central line catheters are used in the LTCH setting as part of patient care management. Therefore, as with other patients, LTCH patients are at risk for developing a CLABSI. For calendar year 2009, there were 4,522 LTCH claims in CMS data with ICD–9 codes for this infection, supporting both the relevance of this measure and the presence of central line catheter usage. Comment: Some commenters commended the NQF endorsement process and some commenters expressed concern that the CLABSI measure is not NQF-endorsed for the LTCH setting and suggested that the LTCH CLABSI measure undergo the same evaluation before being published in the final rule. One commenter suggested that CMS work with the CDC to test this measure and ‘‘refine the measure’’ and that CMS seek NQF endorsement for use in LTCHs prior to finalizing its use. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Response: We agree with the value of the NQF endorsement process. We are using an NQF endorsed CLABSI measure for Hospital ICU’s and applying it to the LTCH setting. With regard to the comment that we ‘‘refine the measure’’ prior to the use of this measure, we interpret this to mean to further specify or specify the measure differently for LTCHs. Although the currently NQF endorsed CAUTI measure is not specifically NQFendorsed for the LTCH setting, CLABSI events, from which the measure is calculated, are already being submitted by some LTCHs through the use of the NHSN. We intend to use the same measure specifications as endorsed by NQF for Hospital ICUs as for LTCHs and collected through the NHSN. Comment: Many commenters urged CMS to risk-adjust the CLABSI measure. These commenters stated that some LTCH patients were at much higher risk of developing CLABSI than other, lower risk, patients. Some commenters suggested that data for this measure be based upon the type of LTCH unit and that the measure consider those units associated with the highest risk of infection such as long-term care ventilator units that may utilize central line catheters more extensively. Some commenters noted that there are medical situations where an infection may be anticipated or occur despite best care efforts. Several commenters expressed concern that the perceived lack of risk adjustment could possibly lead to unintended consequences such as reduced access for higher risk patients. Some commenters appeared to express concern that the data provided were not at the individual level. Response: The CLABSI measure as endorsed by NQF does include risk adjustment although not based on individual patient characteristics or comorbidities as suggested by commenters. Rather, as suggested by others and endorsed by NQF for ICUs, the CDC NHSN process uses facility type and location type information for risk adjustment by stratifying the results by facility and location type. The results are then reported as observed over expected based on the expected rate for the facility or location. In this case, measures would be calculated based on the expected rate for LTCHs or locations within the facility, based on the data reported to the CDC. This is reported as a Standardized Infection Ratio (SIR), described in detail at https:// www.cdc.gov/nhsn/PDFs/pscManual/ 7pscCAUTIcurrent.pdf. The SIR is a summary statistic that risk adjusts by taking into account risk differences across patient population by stratifying PO 00000 Frm 00274 Fmt 4701 Sfmt 4700 by hospital location. This is the only type of summary statistic method that is used at this time, or that has historically been used by the CDC for the CLABSI and CAUTI measures. After extensive consultation with the CDC in this matter, we have determined that it is best to defer experts at CDC, who have recommended that SIR is the most appropriate method of summary statistic for taking risk differences in patient population into account. In addition, during a Technical Expert Panel (TEP) that was convened on July 7, 2011, many of the LTCH subject-matter experts opined that SIR is an appropriate and adequate method of taking risk differences in patient population into account for the CAUTI and CLABSI measures. After consideration of the public comments we received, we are finalizing the Central Line CatheterAssociated Bloodstream Infection measure, as proposed, for the FY 2014 payment determination. (3) FY 2014 Measure #3: Pressure Ulcers The third measure we proposed for LTCHs for purposes of the FY 2014 payment determination is an application of a CMS-developed NQFendorsed measure for short-stay nursing home patients: (NQF #0678, formerly assigned as NQF # NH–012–10) ‘‘Percent of Residents with Pressure Ulcers that Are New or Have Worsened.’’ This measure includes the percentage of patients who have one or more stage 2–4 pressure ulcers that are new or worsened from a previous assessment. Consistent in our support of the National Quality Strategy principles, mitigating the occurrence or worsening of pressure ulcers is essential in the improvement of patient safety and, therefore, patient care. We recognize NQF endorsement of this measure is limited to short-stay nursing home patients, but believe that this measure is highly relevant and a high priority quality issue for the care of LTCH patients. Pressure ulcers are high-volume and high-cost adverse events across the spectrum of health care settings from acute hospitals to home health. Patients in the LTCH setting are medically complex, have functional limitations that often are severe, and, therefore, are at high risk for the development, or worsening, of pressure ulcers. Pressure ulcers are serious medical conditions and an important measure of quality. Pressure ulcers can lead to serious, lifethreatening infections, which substantially increase the total cost of care. Furthermore, as we noted in the FY 2008 IPPS final rule with comment E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 period (72 FR 42705), in 2006 there were 322,946 reported cases of Medicare patients with a pressure ulcer as a secondary diagnosis—each case had an average charge of $40,381 for a hospital stay, for an annual total cost of 13 billion dollars. The prevalence of pressure ulcers in health care facilities is increasing, with some 2.5 million patients being treated annually for pressure ulcers in acute care facilities.67 68 In 2006, there were 503,300 acute hospital stays during which pressure ulcers were noted. This is a 78.9 percent increase from 1993 when there were approximately 281,300 hospital stays related to pressure ulcers.69 The CMS measure development contractor convened a TEP on January 31, 2011, which identified this topic as highly relevant and a high priority quality issue for the care of LTCH patients, and the application of this measure (NQF #0678) as appropriate for LTCHs. Section 1886(m)(5)(D)(ii) of the Act provides that ‘‘[i]n 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 entity with a contract under section 1890(a) [of the Act], the Secretary may specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary.’’ We reviewed the NQFendorsed measures, and we were unable to identify any NQF-endorsed measures for the monitoring of pressure ulcers that are new or worsened, for the LTCH setting. We are unaware of any other measure for the LTCH setting of new or worsened pressure ulcers that are approved by voluntary consensus standards bodies and endorsed by NQF. Therefore, we proposed to adopt an application of this NQF-endorsed (for short-stay nursing home patients) measure for the LTCH quality reporting program under the Secretary’s authority 67 Russo CA, Steiner C, Spector W.: Hospitalizations related to pressure ulcers among adults 18 years and older, 2006 (Healthcare Cost and Utilization Project Statistical Brief No. 64). December 2008. Available at: https://www.hcupus.ahrq.gov/reports/statbriefs/sb64.pdf. 68 Institute for Healthcare Improvement: Relieve the pressure and reduce harm. May 21, 2007. Available at: https://www.ihi.org/IHI/Topics/ PatientSafety/SafetyGeneral/ImprovementStories/ FSRelievethePressureandReduceHarm.htm. 69 MacLean DS.: Preventing & managing pressure sores. Caring for the Ages. March 2003;4(3):34–7. Available at: https://www.amda.com/publications/ caring/march2003/policies.cfm. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 set forth at section 1886(m)(5)(D)(ii) of the Act. We solicited public comment on the proposed quality measure Percent of Residents with Pressure Ulcers that Are New or Have Worsened in the FY 2012 IPPS/LTCH PPS proposed rule for the quality reporting program for LTCHs. Comment: Most commenters supported the selection of pressure ulcers for use in quality measurement and reporting. However, one commenter questioned the clinical relevance of this measure, and believed that there was a lack of supporting data in the proposed rule. Another commenter suggested that few studies have conclusively shown that ‘‘standard interventions implemented today have been proven beyond a reasonable doubt to do anything at all to prevent pressure ulcers.’’ Response: We appreciate the commenters’ support of this measure. We believe, as the data provided in the proposed rule suggests, that the development of new or worsened pressure ulcers is a very relevant clinical quality issue in all clinical settings, including LTCHs. Our measure development contractor convened a TEP on January 31, 2011, which identified this topic as highly relevant and a high priority quality issue for the care of LTCH patients, and the application of this measure (NQF 0678) as appropriate for LTCHs. Specifically, in LTCHs alone, claims submitted to CMS in 2009 included nearly 700 claims for stage one pressure ulcers; just over 2,600 claims for stage 2 pressure ulcers; just over 7,000 for stage 3 pressure ulcers; nearly 10,000 claims for stage 4 pressure ulcers and just over 1,100 claims for both stage 3 and stage 4 pressure ulcers; as well as nearly 800 claims for unstageable pressure ulcers. LTCH patients are often at an increased risk of pressure ulcer formation given their medical complexities, and often lack of mobility. We disagree with the commenter who believed that few studies have conclusively shown that ‘‘standard interventions implemented today have been proven beyond a reasonable doubt to do anything at all to prevent pressure ulcers.’’ We believe that the evidencebased pressure ulcer prevention guidelines published by clinical experts, such as the National Pressure Ulcer Advisory Panel in conjunction with the European Pressure Ulcer Advisory Panel (NPUAP and EPUAP) (https://www. npuap.org/resources.htm) as well as the Institute for Clinical Systems Improvement, and others, suggest that pressure ulcer development and worsening can be reduced and mitigated PO 00000 Frm 00275 Fmt 4701 Sfmt 4700 51749 through the application of such best practices. Comment: Many commenters agreed that pressure ulcers are an important issue, and are important for quality measurement in the LTCH setting. However, one commenter expressed concern that the proposed pressure ulcer measure was developed for shortstay nursing home patients and suggested that patients in LTCHs require hospital-level, physician-led, post acute care, while patients in nursing homes have far lower medical acuity and resource use. Some commenters recommended harmonizing the LTCH pressure ulcer measure with Hospital IQR Program pressure ulcer measure which includes only Stages III and IV, suggesting that this would facilitate cross-site data comparisons that would be helpful for policy work to reduce patient harm, improve transitions of care, reduce preventable readmissions and related delivery system reforms. Commenters suggested the involvement of albumin levels in wound improvement. Commenters also suggested that CMS work to test this measure, ‘‘refine the measure,’’ and seek NQF endorsement for use in LTCHs prior to finalizing its use. Response: We appreciate the many supportive comments as to the importance of the issues of pressure ulcers in the LTCH setting. Although we agree LTCHs are different than nursing homes in terms of patient types, we do not agree that the issue of pressure ulcers is substantially different in terms of preventability and treatment. With respect to harmonizing measures with the Hospital IQR Program, we believe that an assessment of patients as done for the nursing home measure is preferable for a pressure ulcer measure as opposed to a claims based measure relying on diagnosis codes. We believe the assessment provides more information particularly for worsening and improving pressure ulcers. As for the suggestion albumin levels are involved in wound improvement, this is not a risk factor as included in the NQFendorsed measure we are adopting for application to the LTCH setting. Finally, as to the future refinement, we are applying the measure as endorsed by NQF for nursing homes. Comment: Many commenters believed that the term ‘‘worsening’’ pressure ulcers was ambiguous. These commenters noted that inter-rater reliability of wound staging may vary significantly, and suggested that the term ‘‘worsening’’ be defined. Commenters also suggested that ‘‘worsening’’ be removed from the description and that CMS base the E:\FR\FM\18AUR2.SGM 18AUR2 51750 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations quality measure solely on the appearance of ‘‘new’’ pressure ulcers. Many commenters also suggested that this measure include an indicator for when a pressure ulcer is ‘‘present on admission’’ (POA), as is done with the Hospital IQR Program measure, Pressure Ulcers Stages III and IV. Some commenters indicated that it is difficult to accurately differentiate between worsening pressure ulcers and pressure ulcers that appear to worsen as part of the healing process before they get better, such as pressure ulcers that undergo debridement, or in instances when the patient has an episode of sepsis or hemodynamic instability. These commenters suggested that debridement often improves the overall condition of the wound but it is expected that it initially will increase the measurement of the wound. In addition, some commenters recommended adding a measure to identify healing pressure ulcers. One commenter suggested that the pressure ulcer measure should be defined as the number of patients per 1000 days who suffered a pressure ulcer. Response: This proposed measure is an application of a measure that NQFendorsed in the SNF setting. We do not agree that the measure is ambiguous or that it should be based solely on the appearance of new pressure ulcers. As specified for the LTCH setting, the measure, new or worsening pressure ulcers, is based on changes in skin integrity that occurs within the LTCH. With regard to the Hospital IQR Program, and the use of a present on admission (POA) indicator, it is important to note that the pressure ulcer measure in the Hospital IQR Program relies on claims codes to identify pressure ulcers. A POA indicator is necessary to avoid attributing to the hospital the development of a pressure ulcer when the pressure ulcer was present on admission. By contrast, the measure that we proposed for LTCHs is based on the direct assessment of patients, the first assessment of which is upon admission. The measure considers pressure ulcers that were present on admission based on the initial assessment in order to assess for any worsening of these pressure ulcers during the patients’ stays. Unstageable wounds include deep tissue injuries and pressure ulcers covered by nonremovable dressings, slough or eschar. These are not currently included in this measure since unstageable wounds cannot be measured, and therefore the presence of worsening cannot be determined. For example, a pressure ulcer that presents with slough or eschar cannot be staged, and is not considered worsened. Only after, and if, debridement occurs, and the dead tissue is removed, can such a wound be properly staged. If after wound debridement, the wound is staged and subsequently evaluated to have increased in the stage, the wound is considered worsened. However, such a wound may not be considered worsened if the stage remains unchanged after debridement and staging. For additional information related to this measure, including definitions related to worsening, unstageable and the staging of the pressure ulcers, as well as topics such as the inability to stage pressure ulcers with eschar or slough, we refer readers to the Minimum Data Set 3.0 (MDS 3.0) Resident Assessment Instrument Manual, page 24 of Section M, Skin Conditions, which describes the NPUAP approach. This information can be found on the CMS Web site for the MDS 3.0: https://www.cms.gov/NursingHome QualityInits/45_NHQIMDS30Training Materials.asp#TopOfPage. Finally, with respect to the suggestion of a measure of healing pressure ulcers and measurement on the basis of 1000 patients, we will consider these suggestions for the future. However, as we have proposed, we are finalizing the application of the existing NQF endorsed specifications for pressure ulcers for the nursing home setting to LTCHs. After consideration of the public comments we received, we are finalizing the Percent of Residents with Pressure Ulcers that Are New or Have Worsened measure, as proposed, for the FY 2014 payment determination. 3. Possible LTCH Quality Measures under Consideration for Future Years As discussed below, we seek to achieve a comprehensive set of quality measures to be available for widespread use for informed decision-making and quality improvement. Therefore, as stated previously and as indicated in the proposed rule, we intend to propose, through future rulemaking, measures included in the HHS Action Plan to Prevent HAIs. As we also stated in the proposed rule, we intend to propose through future rulemaking measures related to ventilator care such as the NQF-endorsed Institute for Healthcare Improvement process measure, NQF #0302, Ventilator Bundle, which is a comprehensive ventilator care-bundle process measure that is designed to facilitate protocols such as weaning, and mitigate ventilator-related infections, such as ventilator-associated pneumonia, and other complications. We also intend to propose additional outcome measures such as those related to acute care rehospitalization. We are aware of the limits related to feasibility in data submission at the present time. For example, there is no feasible means to submit the ventilator bundle process measure at this at this time, and are therefore we are currently identifying the data elements necessary for this measure using a data subset from the Continuity Assessment Record and Evaluation (CARE) data set as well as a submission mechanism. We also intend to propose, through future rulemaking, additional measures, such as those related to symptom management, physical restraints, medication use, falls, infections, and function, using the data subsets of the CARE data set necessary for measure calculations. In the proposed rule, we invited public comment and suggestions on the implementation of a standardized assessment instrument for LTCHs that would similarly support the calculation of quality measures. We also invited public comment on the measures and measures topics under consideration for future years set out below. In addition, we invited other suggestions and rationale to support the adoption of measures and topics not listed below. mstockstill on DSK4VPTVN1PROD with RULES2 POSSIBLE MEASURES AND MEASURE TOPICS FOR THE LTCH QUALITY REPORTING PROGRAM UNDER CONSIDERATION FOR FUTURE YEARS Overarching Goal: Safety and Healthcare Acquired Conditions—HAIs HAI reporting for: • Ventilator-associated Pneumonia.*** • Surgical site infection rate.*** • Multi-drug resistant organism infection. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00276 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 51751 POSSIBLE MEASURES AND MEASURE TOPICS FOR THE LTCH QUALITY REPORTING PROGRAM UNDER CONSIDERATION FOR FUTURE YEARS—Continued Overarching Goal: Safety and Healthcare Acquired Conditions: Avoidable Adverse Events and Serious Reportable Events • • • • • • • • • • • • Unplanned acute care hospitalizations. Mortality.*** Blood Incompatibility.** Foreign object retained after surgery.** Manifestation of poor glycemic control.** Air Embolism.** Falls and trauma.** Venous Thromboembolism.* Injuries secondary to Poly-pharmacy. Injuries related restraint use. Medication errors.* Stage III and IV Pressure Ulcer.** Overarching Goal: Safety and Improvement Practices for Adverse Event Reduction • • • • • Central line bundle.*** Ventilator bundle.*** Patient Immunization for Influenza.*** Patient Immunization for Pneumonia.*** Staff immunization.*** Overarching Goal: Safety—NQF Endorsed Nursing Sensitive Care Measures • • • • • Patient Fall Rate.*** Falls with Injury.*** Pressure Ulcer Prevalence.*** Restraint Prevalence (vest and limb only).*** Skill mix (Registered Nurse [RN], Licensed Vocational/Practical Nurse [LVN/LPN], unlicensed assistive personnel [UAP], and contract)*** Nursing care hours per patient day (RN, LPN, UAP).*** • Voluntary turnover for RN, APN, LPN, UAP.*** • Practice Environment Scale-Nursing Work Index.*** mstockstill on DSK4VPTVN1PROD with RULES2 * Harmonizes with NQF Serious Reportable Events. ** Harmonizes with Hospital-Acquired Conditions–Present on Admission Program for IPPS hospitals. *** Harmonizes with NQF-endorsed measures. We solicited public comment on possible LTCH quality measures under consideration for future years. Comment: Some commenters generally supported the future measures under consideration, and specifically supported several of the potential measures for LTCH quality reporting in future years, including: Staff immunization for influenza; measures for ventilator care and ventilatorassociated pneumonia; surgical site infections; multi-drug resistant organism infections; readmissions; process measures related to reducing catheter-associated urinary tract infections and Stage III and IV pressure ulcers; glycemic control in diabetic patients; and MRSA bacteremia for multidrug-resistant organisms. Commenters also suggested adding to the list chronic obstructive pulmonary disease, C. Difficile SIR, process measures for management of cardiovascular conditions, including heart failure and atrial fibrillation, condition-specific readmissions, and a process measure for management of patient serum albumin levels as a replacement measure for pressure ulcers. In addition, commenters VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 suggested that CMS use measures considered as ‘‘best in class.’’ Several commenters cautioned against the use of ventilator bundle process measure because of the burden related to this measure. Response: We appreciate the commenters’ support of the listed measures and measure topics, as well as the cautions expressed, and we will take their comments into consideration in determining whether to adopt the measures for the LTCH quality reporting program in the future. We also thank the commenters for their suggested additional measures for potential use in future reporting program years. Comment: Commenters supported the use of the NHSN as a reporting system for future measure submission. Some commenters supported the use of the CARE data item set in collecting data in the future. Other commenters strongly recommended delaying implementation of the CARE data item set for future use until the PAC–PRD has been reported to Congress and undergone Congressional and public comments review. One commenter opposed the use of the data set used in the PAC–PRD. PO 00000 Frm 00277 Fmt 4701 Sfmt 4700 Response: We thank the commenters for their feedback and support in the future use of the CARE data item set. CMS concluded its PAC–PRD and data collection using CARE in December, 2010. We plan to submit our report to Congress with findings by the close of 2011. 4. Data Submission Methods and Timelines a. Method of Data Submission for HAIs In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25988 through 25890), we proposed to adopt two HAI quality measures, Central Line CatheterAssociated Bloodstream Infection (CLABSI) Event: CLABSI rate per 1000 central line days, and Urinary CatheterAssociated Urinary Tract Infection (CAUTI) Event: CAUTI rate per 1000 urinary catheter days. We proposed to use CDC/NHSN for data collection and reporting for these two HAI measures (https://www.cdc.gov/nhsn/). As we noted above, the NHSN is a secure, Internet-based surveillance system. It is maintained by CDC, and can be utilized by all types of healthcare facilities in the United States, including E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51752 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations LTCHs, acute care hospitals that collect and report HAIs through the NHSN as part of our Hospital IQR Program, as well as psychiatric hospitals, rehabilitation hospitals, outpatient dialysis centers, and ambulatory surgery centers. The NHSN enables health care facilities to submit their HAI event data, and access their data for the purposes of internal infection-surveillance. Facilities can also use the NHSN to obtain information on clinical practices known to prevent HAIs, information on the incidence or prevalence of multidrug-resistant organisms within their organizations, and information on other adverse events. Some States use the NHSN as a means of collecting State law-mandated HAI reporting. NHSN collects data via a Web-based tool hosted by the CDC and available at: https://www.cdc.nhsn. This reporting service is provided free of charge to healthcare facilities. In addition, CDC may have the ability to receive NHSN measures data from electronic health records (EHRs) in the near future. Currently, the data reporting of these two HAI events is completed through the NHSN. More than 20 States require hospitals to report HAIs using NHSN, and CDC supports more than 4,000 hospitals that are using the NHSN. Over 200 LTCHs currently submit HAI data via the NHSN. HAI event reporting and meaningful HAI event surveillance by the LTCH, using the CDC/NHSN requires the submission of all HAI events, regardless of payer. We believe delivery of high quality care in the LTCH setting is imperative. Collecting such quality data on all patients in the LTCH setting supports CMS’ mission to ensure high quality care for Medicare beneficiaries. This will provide us with the most robust and accurate reflection of quality in the LTCH setting. Therefore, in order to facilitate and ensure that high quality care is delivered to Medicare beneficiaries in the LTCH setting, we proposed that quality data related to HAIs be collected on all LTCH patients, regardless of payer. Currently the NHSN has data collection forms, data submission, and reporting mechanisms in place that are in use by LTCHs for both CLABSI and CAUTI measures. Details related to the procedures using the NHSN for data submission can be found at: https:// www.cdc.gov/nhsn. Specifically, details related to the procedures of using the NHSN for data submission and information on definitions, numerator data, denominator data and data analyses for CLABSI Event: CLABSI rate per 1000 central line days calculated by dividing the number of CLABSI by the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 number of central line days and multiplying the result by 1000 can be found at https://www.cdc.gov/nhsn/ PatientSafety.html. Details related to the CLABSI SIR can be found at https:// www.cdc.gov/hai/pdfs/stateplans/ SIR_05_25_2010.pdf. Details related to the procedures of using the NHSN for data submission and information on definitions, numerator data, denominator data and data analyses for CAUTI Event: CAUTI rate per 1000 urinary catheter days calculated by dividing the number of CAUTIs by the number of catheter days and multiplying the result by 1000 can also be found at https://www.cdc.gov/nhsn/ PatientSafety.html. The reporting procedures for these HAI events would not be affected by the use of the SIR instead of the current rate calculation. CDC performs those calculations. Further information related to the use of the SIRs can be found on the Web sites at: https:// www.hhs.gov/ash/initiatives/hai/ appendices.html and https:// www.cdc.gov/HAI/surveillance/ QA_stateSummary.html. We solicited public comment on the proposed methods of data submission for the CLABSI and CAUTI measures in the FY 2012 IPPS/LTCH PPS proposed rule for the quality reporting program for LTCHs. Comment: Several commenters supported the use of the NHSN for data reporting. However, some commenters questioned the readiness of the CDC’s NHSN infrastructure to accept a greater volume of data by adding LTCH reporters. Several commenters expressed concerns with provider burden and resources required to enroll, train, and implement data reporting through the CDC’s NHSN. Response: CDC has indicated that the NHSN has undergone a major architectural redesign over the last year in response to the need to scale up to more users and to improve its functionality. Based on the current number of facilities reporting, the small number of additional LTCHs that we proposed to add equates to only a 5 percent increase in usage, which is not an appreciable burden on the system. CDC is confident that the changes it is making will meet the challenges of the proposed increase in NHSN usage. Comment: One commenter suggested that the NHSN would create an additional burden as a new reporting system for the LTCHs that are not currently using NHSN for reporting. Response: At this time, nearly half of all certified LTCHs report HAI events using the NHSN. As we discuss in more detail in section IX.J.3.b. of Appendix A PO 00000 Frm 00278 Fmt 4701 Sfmt 4700 to this final rule, we believe that the burdens associated with submitting data to the CDC via NHSN will be modest because many LTCHs are NHSNregistered and trained and have experience using this system. For LTCHs that have not used this system, the registration and training are free and require only a small amount of time. Finally, we estimate that the costs for data submission for the LTCHs that are not currently using the NHSN for both measures will be modest. Comment: Several commenters supported the use of NHSN data for collection of data pertaining to CLABSI and CAUTI quality measures as well as additional future measures. One commenter suggested that CMS mandate the use of NHSN by making its use part of the Conditions of Participation (CoPs) for LTCHs. Several commenters recommended the use of existing data reporting mechanisms for data submission, including EHRs, in order to minimize burden, avoid duplication of efforts, improve accuracy, and align these quality-related data collection efforts with other quality assessment reporting efforts (for example, The Joint Commission). These commenters noted that introduction of a new data collection system could prove difficult for LTCHs not yet reporting information through this system, especially small or rural LTCHs, and some commenters suggested that CMS allow providers choice in submission systems. Response: We thank the commenters for their support of the use of the NHSN for the data collection of the CAUTI and CLABSI measure. We also thank the commenter for the suggestion that we integrate the use of the NHSN as a part of the LTCH CoPs. However, we do not believe it is necessary to add such a requirement to the LTCH CoPs in order to require submission of the applicable data through the NHSN for the LTCH quality reporting program. We wish to minimize any burdens associated with the LTCH quality reporting program. We intend to minimize burden where measures are already submitted through measure simplification, while still working to implement a quality reporting program that concentrates on providing safe, sound care for all patients receiving services in LTCHs. We chose the NHSN reporting system because implementation of this system has already been shown to be both feasible and useful in LTCH settings. The reporting of HAIs using the NHSN is provided free of charge by the CDC for acute and post acute settings. NHSN reporting for HAIs is already mandated or soon will be mandated in 11 States E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations and the District of Columbia. The CLABSI measure is already in place in 11 States and the District of Columbia. At the time of this final rule, CDC indicated that over 200 LTCHs, out of 439 certified LTCHs, report HAI events using the CDC via NHSN. During the 12month period from April 2010 to March 2011, 58 LTCHs reported CLABSI for at least one month, and the same number reported CAUTI for at least one month. Over 4,000 hospitals currently submit safety reports to NHSN; and over 20 States require acute-care hospitals to participate. The CDC/NHSN HAI event reporting, therefore, provides an opportunity for alignment across healthcare settings and alignment with definitions between various healthcare settings as well as among all LTCHs. Comment: Several commenters noted that data collected for NHSN does not include collection of individual patient level information, limiting the potential for more robust risk adjustment based on severity of illness and other patientlevel risk factors. The commenters believed that the only real variables collected by NHSN for use in riskadjustment for CAUTI and CLABSI are device days and device utilization. Response: As previously discussed in response to another comment on risk adjustment for the two proposed NHSN measures, the risk adjustment methodology of the CDC, as endorsed by NQF uses risk stratification by facility type and location calculating observed over expected for a particular facility or location and reported as a Standardized Infection Ratio. We believe that this risk adjustment is sufficient as endorsed by NQF, and avoids adding to the complexity and reporting burden of the measures that would arise should we require detailed information on patient co-morbidities and characteristics. After consideration of the public comments received, we are adopting as final our proposed method of data submission for HAIs using the CDC/ NHSN, with the first reporting period to begin October 1, 2012, for the FY 2014 payment determination. b. Timeline for Data Reporting Related to HAIs CDC recommends that HAI reporting occur closest in time to the event, and further recommends that reporting occur no later than 30 days following the event. To facilitate HAI surveillance and reporting for these proposed measures for payment determination, we proposed an additional timeframe for reporting following the initial reporting period. We proposed a data submission timeframe for NHSN event 51753 reporting for these proposed LTCH quality reporting program HAI measures of October 1, 2012 through December 31, 2012 for the determination of FY 2014 annual payment update, and that LTCHs submit their data no later than May 15, 2013. In order to better align with the current Hospital IQR Program HAI reporting processes (75 FR 20223), we also proposed that all subsequent LTCH quality reporting cycles will be based on a calendar year cycle (for example, beginning January 1, 2013 through December 31, 2013) for determination of the update to the standard Federal rate for each LTCH in FY 2015 and subsequent years. We proposed that, beginning in CY 2013, and for all subsequent years, LTCHs would submit HAI event data via the NHSN, for four consecutive quarters of the calendar year. For example, for the FY 2015 annual payment update to the standard Federal rate, LTCHs would submit HAI data collected in the first quarter of CY 2013, the second quarter of CY 2013, the third quarter of CY 2013, and the fourth quarter of CY 2013. The timelines for submission of quality data on the CLABSI and CAUTI measures for the FY 2015 annual payment update that we proposed are set out below. TIMELINES FOR SUBMISSION OF DATA ON THE CENTRAL LINE CATHETER-ASSOCIATED BLOODSTREAM INFECTIONS AND URINARY CATHETER-ASSOCIATED URINARY TRACT INFECTIONS (CAUTI & CLABSI) MEASURES FOR THE FY 2015 ANNUAL PAYMENT UPDATE CDC–NHSN Collection and quarterly report generation time CY 2013 Infection event(s) mstockstill on DSK4VPTVN1PROD with RULES2 Q1 Q2 Q3 Q4 (January–March 2013) ................................ (April–June 2013) ........................................ (July–September 2013) ............................... (October–December 2013) .......................... LTCHs would have until the final submission deadline for the LTCH quality reporting program to submit their quarterly data to the NHSN. After the final submission deadline has occurred for each CY 2013 quarter, CMS will receive a file from the CDC with the aggregated measurement rates of the specific calculations that have been generated by the NHSN for the LTCH quality reporting program and we will use those results for purposes of determining whether the LTCH met the requirements for the LTCH quality reporting program. We invited public comments on the reporting cycle for LTCHs. Comment: Many commenters recommended a 1-year delay in the publication of the CLABSI and CAUTI VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Proposed submission deadlines for the LTCH quality reporting program FY 2015 payment determination January 31–August 15 ..................................... April 30–November 15 ..................................... July 31–February 15 ........................................ October 31–May 15 .......................................... August 15, 2013. November 15, 2013. February 15, 2014. May 15, 2014. quality measures. These commenters suggested that the delay would allow time for administrative processes and procedures, training, NQF endorsement, validation of data, and the strengthening of the NHSN system, and/or addition of a POA indicator, while still allowing for data to be submitted in time to meet the requirements of section 1886 (m)(5)(A)(iii) of the Act for measure publication by October 1, 2012. Several commenters suggested the initial roll out of one quality measure at a time, for use in testing and evaluation of benefit. One commenter recommended that the CLABSI quality measure be implemented only after site-based testing. Response: There is already current and successful use of the NHSN reporting infrastructure for HAI measures for over 200 of the 439 certified LTCHs. We are announcing these measures at this time to provide ample notice for facilities for the purposes of administrative procedures such as enrollment and training. We intend to announce specifications related to the HAI measures’ data collection, submission, and reporting procedures on or before January 31, 2012. Specifically, we note that data collection does not begin until October 1, 2012. Therefore, there already exists a one year delay incorporated from the publication of these measures and when data collection begins for purposes of the FY 2014 payment determination. We also are working with the CDC for full implementation support. PO 00000 Frm 00279 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51754 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations After consideration of the public comments we received, we are adopting as final the proposed reporting cycle for data submission for HAIs for FY 2014 payment determination. In alignment with the Hospital IQR Program, (75 FR 50223), we also proposed that once quarterly each LTCH will utilize an automated report function that will be made available to submitters in the NHSN, to generate a quarterly report containing individual LTCH-level numerator, denominator, and exclusion counts for these two HAI measures specifically. CDC will create an automated LTCH quality program report function and add it to NHSN’s reporting functionalities. While LTCHs may be reporting other data elements to CDC for other reporting programs (that is, State-mandated surveillance programs), the quarterly LTCH quality program report that would be generated within NHSN would only contain those data elements needed to calculate the two measures currently being proposed for the LTCH quality reporting program. We would only receive this aggregated data from CDC. We also proposed that any further details regarding, data submission and reporting requirements for HAI measures to be reported via NHSN would be posted on the CMS Web site at: https://www.cms.gov/LTCH–IRF– Hospice-Quality-Reporting/ by no later than January 31, 2012. Requirements for NHSN participation, measure specifications, and data collection can be found on the CDC Web site at: https://www.cdc.gov/nhsn/. LTCHs are encouraged to visit this Web site in order to view the NHSN enrollment and reporting requirements. Training resources are available there. In order to allow adequate time for enrollment in the NHSN, and for training to take place, should these measures be finalized, additional details related to this reporting program’s requirements, such as when enrollment is due to occur, will be announced by no later than January 31, 2012, on the CMS Web site at: https://www.cms.gov/ LTCH–IRF–Hospice-Quality-Reporting/. In the announcement, we would propose to provide guidance on the specifications, definitions and reporting requirements. We sought comment on the alignment with the Hospital IQR Program reporting cycle. Comment: Commenters expressed appreciation for the alignment of LTCH quality reporting program’s data submission timelines with those in the Hospital IQR Program. Commenters also expressed appreciation that the LTCH quality reporting program follows the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 basic structure of the Hospital IQR Program. Several commenters requested that, like the Hospital IQR Program, there also be procedures and methodology for data validation, an appeals process, and that LTCHs be permitted to review their data 30 days before it is made available to the public. Response: We appreciate the commenters’ support. We will consider suggestions with regard to the procedures and processes that are to be put into place for the LTCH quality reporting program, and data validation methodology as well as an appeals processes in future rulemaking. After consideration of the public comments we received, we are adopting as final the proposed timeline for data submission for HAIs for FY 2014 payment determination. c. Method of Data Collection and Submission for the Pressure Ulcer Measure Data In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25989 through 25990), we proposed that the pressure ulcer data elements necessary to calculate the pressure ulcer measure would be identical to those data elements collected through the Minimum Data Set 3.0 (MDS 3.0), which is a reporting instrument used in nursing homes. The current MDS 3.0 pressure ulcer items evolved as an outgrowth of CMS’ work to develop a standardized patient assessment instrument, referred to as CARE. The current MDS 3.0 pressure ulcer items are also currently used in the calculation of the NQF-endorsed nursing home pressure ulcer measure, Percent of Residents with Pressure Ulcers That Are New or Worsened [Short Stay] (NQF #0678, formerly NQF # NH–012–10). We note that the MDS data elements were supported by the National Pressure Ulcer Advisory Panel (NPUAP). We believe that to support the standardized collection and calculation of the LTCH pressure ulcer quality measure will require the use of a subset of the standardized CARE instrument, and thus we proposed the use of a subset of the CARE instrument’s assessment items for data collection. We will be using specifically the pressure ulcer data elements necessary to calculate the pressure ulcer measure, and those data items are identical to those data elements collected through the Minimum Data Set 3.0 (MDS 3.0). The current MDS 3.0 pressure ulcer data items can be found at the CMS Web site at: https://www.cms.gov/NursingHome QualityInits/45_NHQIMDS30Training PO 00000 Frm 00280 Fmt 4701 Sfmt 4700 Materials.asp.70 This data assessment subset will allow identical data elements to be collected in LTCHs and in nursing homes. The CARE assessment instrument, was developed and tested in the postacute care payment reform demonstration (which included LTCHs) as required by section 5008 of the Deficit Reduction Act (DRA), Public Law 109–171. It is a standardized assessment instrument that can be used across all post acute care sites to measure functional status and other factors during treatment and at discharge from each provider. (For more information, we refer readers to the following Web site: https:// www.pacdemo.rti.org.) CARE was tested over the last 2 years in 199 providers, of which 28 were LTCHs. Participant feedback suggested most of these items are already collected by LTCHs during their intake process and in monitoring the patients’ health status during the stay. Importantly, the CARE items meet Federal interoperable data standards and should be transferable by most data systems. A data reporting mechanism for transferring the data to CMS is currently under development. We anticipate that it will be similar to the current systems used to report assessment data for payment and quality monitoring in the other post acute care sites. We believe that, for the collection of data necessary to calculate this pressure ulcer measure, using a CARE subset of standardized data elements to collect, report, and calculate the pressure ulcer quality measure will drive uniformity across settings which will lead to better quality of care in LTCHs and, ultimately, across the continuum of care settings. We also believe that the use of a standardized method of communication will lead to better informed decision making. We stated in the proposed rule that if this proposal is finalized, additional details regarding the data elements needed to calculate this measure, submission requirements and specifications used for these data elements to calculate the pressure ulcer quality measure using a subset of CARE instrument will be published on the CMS Web site at https://www.cms.gov/ LTCH–IRF–Hospice-Quality-Reporting/ by no later than January 31, 2012. We solicited public comment on the proposed methods of data submission for the pressure ulcer data in the FY 70 https://www.cms.gov/NursingHomeQuality Inits/45_NHQIMDS30TrainingMaterials.asp (Look for Downloads. Select MDS 3.0 Item Subsets v1.002. Click on MDS 3.0 ALL Items. Scroll down to Section M, Skin Conditions, items M0100–M0900.) E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 2012 IPPS/LTCH PPS proposed rule for the LTCH quality reporting program. Comment: Commenters suggested that CMS consider existing mechanisms for LTCHs to collect and report data on quality measures with the input of the LTCH provider community, and avoid any unnecessary duplication of reporting for other purposes. Response: We are working with other reporting agencies toward measure simplification and reductions in potentially duplicative reporting. After consideration of the public comments we received, we are adopting as final our mechanism for data submission to be similar to the current systems used to report assessment data for payment and quality monitoring in the other post acute care sites for the data submission mechanism for the pressure ulcer measure data elements as used in the NQF #0678, Percent of Residents with Pressure Ulcers that Are New or Worsened. As stated in the proposed rule, additional details regarding the data elements needed to calculate this measure, submission requirements and specifications used for these data elements to calculate the pressure ulcer quality measure will be published on the CMS Web site at http: //www.cms.gov/LTCH–IRF–HospiceQuality-Reporting/ by no later than January 31, 2012. We proposed to use standardized assessment data elements for data collection that would support the calculation of quality measures in the LTCHs. Specifically, we proposed to use a subset of data items from the CARE data set instrument for the collection of the data elements necessary to calculate the proposed quality measure, the Percent of New or Worsened Pressure Ulcers. This data subset is identical to the MDS 3.0 data elements for pressure ulcers, which constitute the specification for the NQF-endorsed pressure ulcer measure #0678 that we finalized earlier to apply to the LTCH setting. We invited public comment on the use of a subset of CARE data items for the purposes data collection for this measure: Percent of Residents with Pressure Ulcers that Are New or Worsened. We also invited public comment on this proposal for the calculation of the quality measure for pressure ulcers. Comment: Many commenters expressed concern about the use of CARE data elements for collecting data elements on new or worsening pressure ulcers in the LTCHs, asserting the data element set was not tested in the LTCH environment or approved by NQF. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Response: The proposed pressure ulcer measure is an NQF-endorsed measure when used in the nursing home setting. The data elements are identical to MDS 3.0 which constitutes the specifications of the proposed pressure ulcer measure for the LTCH setting. The measure uses data elements that have been tested in LTCHs during the PAC– PRD. The CARE data item set was also tested for reliability and validity in the LTCH environment during the PAC– PRD. The CARE data item set was used to collect over 8,500 assessments on patients in 28 LTCHs in different parts of the country. The items used to populate this measure have been tested for reliability in the LTCH setting, and have shown to have very high agreement. Furthermore, the data elements used to populate the pressure ulcer assessment are based on input from the National Pressure Ulcer Advisory Panel and the Wound Ostomy and Continence Nurses Society, two professional groups that set the standards used in all settings to measure pressure ulcer severity. As a result, we believe that the items are familiar to LTCH staff that assess patients for pressure ulcers. Comment: One commenter expressed disappointment that these specifications of the CARE tool were not made public prior to the comment period. Response: We proposed the use of data elements that are included in the CARE data item set and are included in the MDS 3.0. The MDS specifications are free and are available to the public through the CMS Web site: https://www. cms.gov/NursingHomeQualityInits/ 30_NHQIMDS30TechnicalInformation. asp#TopOfPage. As specified, additional details regarding the submission requirements for the data elements needed to calculate this measure will be published on the CMS Web site at https://www.cms.gov/LTCHIRF-HOSPICE-Quality-Reporting/ no later than January 31, 2012. We are developing draft technical specifications and anticipate publication in the fall of 2011 with final technical specifications on or before January 31, 2012. Comment: One commenter asked when and how often would the quality measure regarding new or worsening pressure ulcers be applied. Response: We interpret the commenter’s question regarding how often would the quality measure be applied to be referencing the number of assessments necessary to calculate the measure. There will be two assessments needed to calculate the measure. The data collected for this measure includes an initial assessment, obtained at the time of the admission, and a subsequent PO 00000 Frm 00281 Fmt 4701 Sfmt 4700 51755 assessment. We expect to provide further details related to measure specifications and submission requirements on or before January 31, 2012. After consideration of the public comments we received, we are adopting as final our method of data submission for the pressure ulcer measure, the use of the quality data elements as used in the NQF-endorsed pressure ulcer measure #0678, Percent of Residents with Pressure Ulcers that Are New or Worsened as required to calculate this measure. d. Timeline for Data Reporting Related to Pressure Ulcers The delivery of high quality care in the LTCH setting is imperative. We believe that collecting quality data on all patients in the LTCH setting supports CMS’ mission to ensure quality care for Medicare beneficiaries. Collecting data on all patients provides the most robust and accurate reflection of quality in the LTCH setting. Accurate representation of quality provided in LTCHs is best conveyed using data related to pressure ulcers on all LTCH patients, regardless of payer. Thus, in order to facilitate and ensure this effort, in the FY 2012 IPPS/ LTCH PPS proposed rule, we proposed that quality data related to pressure ulcers shall be collected on all LTCH patients, regardless of payer, using a subset of the CARE data collection instrument in accordance with the timetable and schedule set forth in section VII.C.4.b. of the preamble to the proposed rule. We stated in the proposed rule that we will provide further details about the data collection instrument on the CMS Web site http: //www.cms.gov/LTCH–IRF–HospiceQuality-Reporting/ as these details become available. We invited public comments on the proposed reporting cycle for LTCHs. Comment: The majority of commenters, including those who supported use of pressure ulcers as a quality measure, strongly recommended delaying the implementation of the CARE data item set as part of regulatory mechanism for pressure ulcer until: results from CARE data item set demonstration have been reported to Congress and undergone Congressional and public comment review; the data items are validated in collaboration with experts in the field, and the tool has been NQF-endorsed. Many commenters suggested a 1-year delay. Other commenters suggested postponing the measure ‘‘indefinitely’’ or did not specify a desired timeframe. Response: We concluded our PAC– PRD and data collection using CARE in E:\FR\FM\18AUR2.SGM 18AUR2 51756 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 December 2010. We plan to submit its report to Congress with findings by the end of 2011. We did not propose the implementation of the entire data instrument, but rather a subset of tested, and reliable data elements. Further, the pressure ulcer measure data elements that populate this measure belong to an already NQF-endorsed measure for which testing was necessary for endorsement. These data elements are currently successfully submitted to CMS by over 16,000 nursing facilities. We are developing draft technical submission requirements and we expect to publish them in August 2011. We anticipate that we will announce final technical specifications related to the pressure ulcer measure data elements on or before January 31, 2012. After consideration of the public comments we received, we are adopting as final the proposed timeline for data submission for the New or Worsened Pressure Ulcers measure and in accordance with the timetable and schedule set forth in section VII.C.4.b. of this preamble, with data collection to begin October 1, 2012 for the FY 2014 payment determination. 5. Public Reporting and Availability of Data Submitted Under section 1886(m)(5)(E) of the Act, the Secretary is required to establish procedures for making any quality data submitted by LTCHs available to the public. Such procedures will ensure that a LTCH has the opportunity to review the data that is to be made public with respect to the LTCH prior to such data being made public. The Secretary will report quality measures that relate to services furnished in LTCHs on the CMS Web site. Currently, the agency is developing plans regarding the implementation of this provision. Procedures for public reporting will be proposed through future rule making. At this time, we have not established procedures or timelines for public reporting of data. Comment: Several commenters requested the addition and specification of a standardized appeals process for all providers to ensure that any issues that arise in data aggregation and validation can be addressed. With respect to all three measures, commenters suggested that LTCHs should be permitted a 30day window to review their data before the data are released to the public. Several commenters stated that there should be a data validation methodology procedure applied. Another commenter believed that measures required for public reporting should be endorsed by the NQF, and ideally by the Measures Application VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Partnership as well. For CAUTI and CLABSI, one commenter encouraged NQF, CMS, and the CDC to determine how best to educate the public with regard to SIRs, in order to make sure that consumers understand the meaning of SIRs prior to the start of public reporting. With respect to reporting of the pressure ulcer measure, one commenter wanted assurance that the CARE-based pressure ulcer measure was validated and viewed as appropriate by LTCHs before the information is shared with the public. Response: We intend to adopt procedures that will ensure that an LTCH has the opportunity to review the data to be made public prior to the data being made public, and will such announce details related to such procedures in the future. Additionally, as required under section 1886(m)(5)(E) of the Act, we will report quality measures that relate to services furnished in LTCHs on a CMS Web site. Specifically, with regard to the comment suggesting that, prior to public reporting of the pressure ulcer measure, the agency ensure the measure was appropriately validated, we note that ongoing review to ensure appropriateness, validity and risk adjustment are integral aspects of quality measure maintenance, and we intend to ensure appropriate measure maintenance of all quality measures. Comment: One commenter expressed appreciation that NHSN will be providing a separate reporting function that will automatically generate LTCH quality program reports. Response: We appreciate the commenter’s support. D. Rebasing and Revising of the Market Basket Used Under the LTCH PPS 1. Background The input price index (that is, the market basket) that was used to develop the LTCH PPS for FY 2003 was the ‘‘excluded hospital with capital’’ market basket. That market basket was based on 1997 Medicare cost report data and included data for Medicare-participating IRFs, IPFs, LTCHs, cancer hospitals, and children’s hospitals. Although the term ‘‘market basket’’ technically describes the mix of goods and services used in providing hospital care, this term is also commonly used to denote the input price index (that is, cost category weights and price proxies combined) derived from that market basket. Accordingly, the term ‘‘market basket,’’ as used in this section, refers to an input price index. Beginning with RY 2007, LTCH PPS payments were updated using a FY PO 00000 Frm 00282 Fmt 4701 Sfmt 4700 2002-based market basket reflecting the operating and capital cost structures for IRFs, IPFs, and LTCHs (hereafter referred to as the rehabilitation, psychiatric, and long-term care (RPL) market basket). We excluded cancer and children’s hospitals from the RPL market basket because their payments are based entirely on reasonable costs subject to rate-of-increase limits established under the authority of section 1886(b) of the Act, which are implemented in regulations at § 413.40. They are not paid under a PPS. Also, the FY 2002 cost structures for cancer and children’s hospitals are noticeably different than the cost structures of the freestanding IRFs, freestanding IPFs, and LTCHs. A complete discussion of the FY 2002-based RPL market basket appears in the RY 2007 LTCH PPS final rule (71 FR 27810 through 27817). In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 21062), we expressed our interest in exploring the possibility of creating a stand-alone LTCH market basket that reflects the cost structures of only LTCH providers. However, as we discussed in the FY 2010 IPPS/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. We remain unable to sufficiently understand the observed differences in costs and cost structures between hospital-based IRFs and freestanding IRFs and between hospital-based IPFs and freestanding IPFs. Therefore, we do not believe it is appropriate at this time to establish stand-alone market baskets for IRFs, IPFs, and LTCHs. We are currently exploring the viability of creating two separate market baskets from the current RPL market basket: One market basket would include freestanding IRFs and freestanding IPFs and would be used to update payments under both the IPF and IRF payment systems. The other market basket would be a stand-alone LTCH market basket. Depending on the outcome of our research, we may propose a stand-alone LTCH market basket in the next LTCH PPS update cycle. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25990), we invited public comment on the possibility of using this type of market basket to update LTCH payments in the future. Comment: Several commenters stated that CMS’ ongoing work to develop a E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 market basket that is distinct to the LTCH PPS, and that recognizes the differences among LTCHs, IRFs, and IPFs, is worthwhile, given the unique role LTCHs play in treating high complexity, long-stay patients. Further, one commenter stated that there are a sufficient number of LTCHs to support a separate market basket, and CMS should have confidence that an LTCHspecific market basket would be a reflection of real inflationary changes to the costs of LTCH goods and services. Several commenters encouraged CMS to create a separate LTCH market basket for the FY 2013 LTCH PPS. Response: We appreciate the commenters’ support as we continue to investigate the feasibility of developing a LTCH-specific market basket. Under the LTCH PPS for FY 2012, we proposed to rebase and revise the FY 2002-based RPL market basket by creating a FY 2008-based RPL market basket as described below. In the following discussion, we provide an overview of the market basket and describe the methodologies we proposed (and are adopting in this final rule) to use for purposes of determining the operating and capital portions of the FY 2008-based RPL market basket. 2. Overview of the FY 2008-Based RPL Market Basket The FY 2008-based RPL market basket is a fixed-weight, Laspeyres-type price index. A Laspeyres price index measures the change in price, over time, of the same mix of goods and services purchased in the base period. Any changes in the quantity or mix of goods and services (that is, intensity) purchased over time are not measured. The index itself is constructed in three steps. First, a base period is selected (in the proposed rule, we proposed to use FY 2008 as the base period) and total base period expenditures are estimated for a set of mutually exclusive and exhaustive spending categories, with the proportion of total costs that each category represents being calculated. These proportions are called cost or expenditure weights. Second, each expenditure category is matched to an appropriate price or wage variable, referred to as a price proxy. In nearly every instance, these price proxies are derived from publicly available statistical series that are published on a consistent schedule (preferably at least on a quarterly basis). Finally, the expenditure weight for each cost category is multiplied by the level of its respective price proxy. The sum of these products (that is, the expenditure weights multiplied by their price levels) VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 for all cost categories yields the composite index level of the market basket in a given period. Repeating this step for other periods produces a series of market basket levels over time. Dividing an index level for a given period by an index level for an earlier period produces a rate of growth in the input price index over that timeframe. As noted above, the market basket is described as a fixed-weight index because it represents the change in price over time of a constant mix (quantity and intensity) of goods and services needed to furnish hospital services. The effects on total expenditures resulting from changes in the mix of goods and services purchased subsequent to the base period are not measured. For example, a hospital hiring more nurses to accommodate the needs of patients would increase the volume of goods and services purchased by the hospital, but would not be factored into the price change measured by a fixed-weight hospital market basket. Only when the index is rebased would changes in the quantity and intensity of the provider’s inputs be captured, with those changes being reflected in the cost weights. Therefore, we rebase the market basket periodically so the cost weights reflect recent changes in the mix of goods and services that hospitals purchase (hospital inputs) to furnish inpatient care between base periods. 3. Rebasing and Revising of the RPL Market Basket In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25991), we invited public comments on our proposed methodological changes to the RPL market basket. The terms ‘‘rebasing’’ and ‘‘revising,’’ while often used interchangeably, actually denote different activities. ‘‘Rebasing’’ means moving the base year for the structure of costs of an input price index (for example, in the proposed rule, we proposed to shift the base year cost structure for the RPL market basket from FY 2002 to FY 2008). ‘‘Revising’’ means changing data sources, price proxies, or methods, used to derive the input price index. For FY 2012, we proposed to rebase and revise the market basket used to update the LTCH PPS. A summary of the public comments we received and any changes we have made as a result of these public comments are included in the applicable areas of this section. a. Development of Cost Categories (1) Medicare Cost Reports As we proposed and are adopting in this final rule, the FY 2008-based RPL market basket consists of several major PO 00000 Frm 00283 Fmt 4701 Sfmt 4700 51757 cost categories derived from the FY 2008 Medicare cost reports for freestanding IRFs, freestanding IPFs, and LTCHs, including wages and salaries, pharmaceuticals, professional liability insurance, capital, and a residual. These FY 2008 Medicare cost reports include providers whose cost report begin date is on or between October 1, 2007, and September 30, 2008. We used FY 2008 as the base year because we believe that the Medicare cost reports for this year represent the most recent, complete set of Medicare cost report data available for IRFs, IPFs, and LTCHs. However, there is an issue with obtaining data specifically for benefits and contract labor from this set of FY 2008 Medicare cost reports because IRFs, IPFs, and LTCHs were not required to complete the Medicare cost report worksheet from which these data were collected (Worksheet S–3, Part II). As a result, only a small number of providers (less than 30 percent) reported data for these categories, and we do not expect these FY 2008 data to improve over time. However, because IRFs, IPFs, and LTCHs were not required to submit data for Worksheet S–3, Part II in previous cost reporting years, we have always had this issue of incomplete Medicare cost report data for benefits and contract labor (including when we finalized the FY 2002-based RPL market basket). Due to the incomplete benefits and contract labor data for IRFs, IPFs, and LTCHs, we developed these cost weights using FY 2008 Medicare cost report data for IPPS hospitals (similar to the method that was used for the FY 2002-based RPL market basket). We provide additional detail on this approach later in this section. Because our goal is to measure cost shares that are reflective of case-mix and practice patterns associated with providing services to Medicare beneficiaries, we limited our selection of Medicare cost reports to those from hospitals that have a Medicare average length of stay that is within a comparable range of their total facility average length of stay. We believe this provides a more accurate reflection of the structure of costs for Medicare covered days. We used the cost reports of LTCHs and IRFs with Medicare average lengths of stay within 15 percent (that is, 15 percent higher or lower) of the total facility average length of stay for the hospital. This is the same edit we applied to derive the FY 2002based RPL market basket and generally includes those LTCHs and IRFs with Medicare average length of stay within approximately 5 days of the facility average length of stay of the hospital. E:\FR\FM\18AUR2.SGM 18AUR2 51758 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations facility average length of stay in order to measure the cost shares that are reflective of case-mix and practice patterns associated with providing services to Medicare beneficiaries. The length-of-stay edits utilized were developed specifically for each provider type (that is, IRFs, LTCHs, and IPFs). For LTCHs and IRFs, we used the cost reports with Medicare average lengths of stay within 15 percent (that is, 15 percent higher or lower) of the total facility average length of stay for the hospital. Applying this edit resulted in excluding about 12 percent of IRFs and LTCHs that, in the aggregate, had a facility length of stay that was 80 percent higher than their Medicare length of stay. The resulting sample of LTCHs and IRFs after the length-of-stay edit, in the aggregate, had a facility length of stay that was 2 percent higher than their Medicare length of stay. We believe applying this edit allows us to achieve our goal of creating a market basket that is reflective of case-mix and practice patterns associated with providing services to Medicare beneficiaries. Comment: One commenter suggested that, because only a small number of providers (less than 30 percent) reported TABLE VII.D–1—MAJOR COST CATEGORIES AND THEIR RESPECTIVE data for benefits and contract labor on COST WEIGHTS AS CALCULATED DI- their cost reports, CMS consider RECTLY FROM FY 2008 MEDICARE requiring all LTCHs to submit this information. COST REPORTS Response: Effective for cost reports beginning on or after May 1, 2010, CMS FY 2008-Based finalized a revised Hospital and RPL market basMajor cost categories Hospital Health Care Complex Cost ket cost weights (percent) Report, Form CMS 2552–10, which is available for download from the CMS Wages and Salaries ....... 47.371 Web page at https://www.cms.gov/ Professional Liability Insurance (Malpractice) 0.764 Transmittals/2010Trans/ Pharmaceuticals ............. 6.514 list.asp?intNumPerPage=10 by clicking Capital ............................. 8.392 on the link to CMS Transmittal All other .......................... 36.959 #R1P240. Form CMS 2552–10 includes a new worksheet (Worksheet S–3, part Comment: One commenter expressed V) which identifies the contract labor concern with CMS’ proposal regarding costs and benefit costs for the hospital length-of-stay edits associated with complex and is applicable to LTCHs and IRFs, which is to use only subproviders and units. CMS anticipates the cost reports of those facilities whose that all providers will report these data Medicare average lengths of stays are so we are able to include the data in within 15 percent (that is, 15 percent future market basket rebasings. higher or lower) of the total facility (2) Other Data Sources length of stay, and asked if CMS could In addition to the IRF, IPF and LTCH identify the number of facilities that Medicare cost reports for freestanding would fall out of these categories. The IRFs, freestanding IPFs, and LTCHs, the commenter based this request on the other data sources we used to develop fact that there are only 440 LTCHs, and the FY 2008-based RPL market basket this exclusion could adversely impact cost weights were the FY 2008 IPPS the industry. Response: As stated above, we Medicare cost reports and the 2002 proposed to limit our selection of Benchmark Input-Output (I–O) Tables Medicare cost reports to those cost created by the Bureau of Economic reports from hospitals that have a Analysis (BEA), U.S. Department of Medicare average length of stay that is Commerce. The FY 2008 Medicare cost within a comparable range of their total reports include providers whose cost mstockstill on DSK4VPTVN1PROD with RULES2 As we proposed, we used a less stringent measure of Medicare average length of stay for IPFs. For this provider type, and in order to produce a robust sample size, we used those facilities’ Medicare cost reports whose average length of stay is within 30 or 50 percent (depending on the total facility average length of stay) of the total facility average length of stay. This is the same edit we applied to derive the FY 2002based RPL market basket. We applied these length-of-stay edits to first obtain a set of cost reports for facilities that have a Medicare length of stay within a comparable range of their total facility length of stay. Using this set of Medicare cost reports, we then calculated cost weights for four cost categories and a residual as represented by all other costs directly from the FY 2008 Medicare cost reports for freestanding IRFs, freestanding IPFs, and LTCHs (found in Table VII.D–1 below). These Medicare cost report cost weights were then supplemented with information obtained from other data sources (explained in more detail below) to derive the FY 2008-based RPL market basket cost weights. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00284 Fmt 4701 Sfmt 4700 report begin date is on or between October 1, 2007, and September 30, 2008. As noted above, the FY 2008-based RPL cost weights for benefits and contract labor were derived using FY 2008-based IPPS Medicare cost reports. We used these Medicare cost reports to calculate cost weights for ‘‘Wages and Salaries,’’ ‘‘Employee Benefits,’’ and ‘‘Contract Labor’’ for IPPS hospitals for FY 2008. For the Employee Benefits cost weight for the FY 2008-based RPL market basket, the ratio of the FY 2008 IPPS benefits cost weight to the FY 2008 IPPS Wages and Salaries cost weight was applied to the RPL Wages and Salaries cost weight. Similarly, the ratio of the FY 2008 IPPS Contract Labor cost weight to the FY 2008 IPPS Wages and Salaries cost weight was applied to the RPL Wages and Salaries cost weight to derive a Contract Labor cost weight for the FY 2008-based RPL market basket. The ‘‘All Other’’ cost category is divided into other hospital expenditure category shares using the 2002 BEA Benchmark I–O data following the removal of the portions of the ‘‘All Other’’ cost category provided in Table VII.D–1 that are attributable to the benefits and contract labor cost categories. The BEA Benchmark I–O data are generally scheduled for publication every 5 years. The most recent data available are for 2002. BEA also produces Annual I–O estimates; however, the 2002 Benchmark I–O data represent a much more comprehensive and complete set of data that are derived from the 2002 Economic Census. For the FY 2002-based RPL market basket, we used the 1997 Benchmark I–O data. As we proposed, we used the 2002 Benchmark I–O data for the FY 2008based RPL market basket. Instead of using the less detailed Annual I–O data, we aged the 2002 Benchmark I–O data forward to 2008. The methodology we used to age the data forward involves applying the annual price changes from the respective price proxies to the appropriate cost categories. We repeat this practice for each year. The ‘‘All Other’’ cost category expenditure shares are determined as being equal to each category’s proportion to total ‘‘all other’’ expenditures based on the aged 2002 Benchmark I–O data. For instance, if the cost for telephone services represented 10 percent of the sum of the ‘‘all other’’ Benchmark I–O hospital expenditures, then telephone services would represent 10 percent of the ‘‘all other’’ cost category of the RPL market basket. Comment: One commenter supported our continued use of general acute hospital cost reports along with the E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 LTCH cost reports to develop the FY 2008-based RPL market basket. Response: As stated above, we are finalizing our proposed methods for rebasing and revising the RPL market basket in this final rule, including the incorporation of cost report data from LTCHs and general acute care hospitals. b. Final Cost Category Computation As stated previously, for the FY 2012 rebasing proposal, we used the Medicare cost reports for IRFs, IPFs, and LTCHs to derive four major cost categories. The FY 2008-based RPL market basket includes two additional cost categories that were not broken out separately in the FY 2002-based RPL market basket: ‘‘Administrative and Business Support Services’’ and ‘‘Financial Services.’’ The inclusion of these two additional cost categories, which are derived using the Benchmark I–O data, is consistent with the addition of these two cost categories to the FY 2006-based IPPS market basket (74 FR 43845). We break out both categories so we can better match their respective expenses with more appropriate price proxies. A thorough discussion of our rationale for each of these cost categories is provided below in section VII.D.3.f. of this final rule. Also, the FY 2008-based RPL market basket excludes one cost category: ‘‘Photographic Supplies.’’ The 2002 Benchmark I–O weight for this category is considerably smaller than the 1997 Benchmark I–O weight, presently accounting for less than one-tenth of one percentage point of the RPL market basket. Therefore, we include the photographic supplies costs in the ‘‘Chemicals’’ cost category weight with other similar chemical products. We did not propose to change our definition of the labor-related share. However, we did propose to rename our aggregate cost categories from ‘‘Laborintensive’’ and ‘‘Nonlabor-intensive’’ services to ‘‘Labor-related’’ and ‘‘Nonlabor-related’’ services. This is consistent with the FY 2006-based IPPS market basket (74 FR 43845). As discussed in more detail below and similar to the FY 2002-based RPL market basket, we are classifying a cost category as labor-related and include it in the labor-related share if the cost category is defined as being laborintensive and its cost varies with the local labor market. In previous regulations, we grouped cost categories that met both of these criteria into laborintensive services. We believe the new labels more accurately reflect the concepts that they are intended to VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 convey. We did not propose to change our definition of the labor-related share because we continue to classify a cost category as labor-related if the costs are labor-intensive and vary with the local labor market. We did not receive any public comments that addressed our proposal to rename our aggregate cost categories from ‘‘Labor-intensive’’ and ‘‘Nonlaborintensive’’ to ‘‘Labor-related’’ and ‘‘Nonlabor-related’’ services. Therefore, in this final rule, we are adopting our proposal to rename our aggregate cost categories without modification. c. Selection of Price Proxies After computing the FY 2008 cost weights for the rebased RPL market basket, it was necessary to select appropriate wage and price proxies to reflect the rate of price change for each expenditure category. With the exception of the proxy for Professional Liability Insurance, all of the proxies for the operating portion of the FY 2008based RPL market basket are based on Bureau of Labor Statistics (BLS) data and are grouped into one of the following BLS categories: Producer Price Indexes—Producer Price Indexes (PPIs) measure price changes for goods sold in markets other than the retail market. PPIs are preferable price proxies for goods and services that hospitals purchase as inputs because these PPIs better reflect the actual price changes encountered by hospitals. For example, we are using a PPI for prescription drugs, rather than the Consumer Price Index (CPI) for prescription drugs, because hospitals generally purchase drugs directly from a wholesaler. The PPIs that we use measure price changes at the final stage of production. Consumer Price Indexes—Consumer Price Indexes (CPIs) measure change in the prices of final goods and services bought by the typical consumer. Because they may not represent the price encountered by a producer, we used CPIs only if an appropriate PPI was not available, or if the expenditures were more similar to those faced by retail consumers in general rather than by purchasers of goods at the wholesale level. For example, the CPI for food purchased away from home is used as a proxy for contracted food services. Employment Cost Indexes— Employment Cost Indexes (ECIs) measure the rate of change in employee wage rates and employer costs for employee benefits per hour worked. These indexes are fixed-weight indexes PO 00000 Frm 00285 Fmt 4701 Sfmt 4700 51759 and strictly measure the change in wage rates and employee benefits per hour. Appropriately, they are not affected by shifts in employment mix. We evaluated the price proxies using the criteria of reliability, timeliness, availability, and relevance. Reliability indicates that the index is based on valid statistical methods and has low sampling variability. Timeliness implies that the proxy is published regularly, preferably at least once a quarter. Availability means that the proxy is publicly available. Finally, relevance means that the proxy is applicable and representative of the cost category weight to which it is applied. The PPIs, CPIs, and ECIs selected meet these criteria. Table VII.D–2 below sets forth the FY 2008-based RPL market basket, including cost categories and their respective weights and price proxies. For comparison purposes, the corresponding FY 2002-based RPL market basket cost weights also are listed. For example, ‘‘Wages and Salaries’’ are 49.447 percent of total costs in the FY 2008-based RPL market basket compared to 52.895 percent for the FY 2002-based RPL market basket. ‘‘Employee Benefits’’ are 12.831 percent in the FY 2008-based RPL market basket compared to 12.982 percent for the FY 2002-based RPL market basket. As a result, compensation costs (wages and salaries plus employee benefits) for the FY 2008-based RPL market basket are 62.278 percent of total costs compared to 65.877 percent for the FY 2002-based RPL market basket. Following Table VII.D–2 is a summary outlining the choice of the proxies we proposed (and are adopting in this final rule) to use for the operating portion of the FY 2008-based RPL market basket. The price proxies for the capital portion are described in more detail in the capital methodology section below in section VII.D.3.d. of this final rule. We note that the proxies for the operating portion of the FY 2008-based RPL market basket are the same as those used for the FY 2006-based IPPS operating market basket. Because these proxies meet our criteria of reliability, timeliness, availability, and relevance, we believe they are the best measures of price changes for the cost categories. For further discussion on the FY 2006-based IPPS market basket, we refer readers to the discussion in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43843). E:\FR\FM\18AUR2.SGM 18AUR2 51760 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations TABLE VII.D–2—FY 2008-BASED RPL MARKET BASKET COST CATEGORIES, WEIGHTS, AND PRICE PROXIES WITH FY 2002-BASED RPL MARKET BASKET COST WEIGHTS INCLUDED FOR COMPARISON FY 2002Based RPL market basket cost weights FY 2008Based RPL market basket cost weights 1. Compensation .......................................................... A. Wages and Salaries1 ............................................... 65.877 52.895 62.278 49.447 B. Employee Benefits1 ................................................. 2. Utilities ...................................................................... A. Electricity .................................................................. B. Fuel, Oil, and Gasoline ............................................ C. Water and Sewage .................................................. 3. Professional Liability Insurance ................................ 12.982 0.656 0.351 0.108 0.197 1.161 12.831 1.578 1.125 0.371 0.082 0.764 4. All Other Products and Services .............................. A. All Other Products .................................................... (1.) Pharmaceuticals ..................................................... 22.158 13.325 5.103 26.988 15.574 6.514 (2.) Food: Direct Purchases ......................................... (3.) Food: Contract Services ........................................ (4.) Chemicals2 ............................................................. (5.) Medical Instruments ............................................... (6.) Photographic Supplies 2 ......................................... (7.) Rubber and Plastics ............................................... (8.) Paper and Printing Products .................................. (9.) Apparel ................................................................... (10.) Machinery and Equipment ................................... (11.) Miscellaneous Products ....................................... B. All Other Services .................................................... (1.) Labor-related Services ........................................... (a.) Professional Fees: Labor-related 3 ........................ 0.873 0.620 1.100 1.014 0.096 1.052 1.000 0.207 0.297 1.963 8.833 5.111 2.892 2.959 0.392 1.100 1.795 ........................ 1.131 1.021 0.210 0.106 0.346 11.414 4.681 2.114 (b.) Administrative and Business Support Services 4 ... n/a 0.422 (c.) All Other: Labor-Related Services 4 ....................... 2.219 2.145 (2.) Nonlabor-Related Services .................................... (a.) Professional Fees: Nonlabor-Related 3 .................. 3.722 n/a 6.733 4.211 (b.) Financial Services 5 ................................................ (c.) Telephone Services ............................................... (d.) Postage .................................................................. (e.) All Other: Nonlabor-Related Services5 .................. 5. Capital-Related Costs .............................................. A. Depreciation ............................................................. (1.) Fixed Assets .......................................................... n/a 0.240 0.682 2.800 10.149 6.187 4.250 0.853 0.416 0.630 0.623 8.392 5.519 3.286 (2.) Movable Equipment ............................................... 1.937 2.233 B. Interest Costs ........................................................... (1.) Government/Nonprofit ............................................ 2.775 2.081 1.954 0.653 (2.) For Profit ................................................................ 0.694 1.301 C. Other Capital-Related Costs .................................... 1.187 0.919 Total ....................................................................... 100.000 100.000 mstockstill on DSK4VPTVN1PROD with RULES2 Cost categories FY 2008-Based RPL market basket price proxies –– ECI for Wages and Salaries, Civilian Hospital Workers. ECI for Benefits, Civilian Hospital Workers. –– PPI for Commercial Electric Power. PPI for Petroleum Refineries. CPI–U for Water and Sewerage Maintenance. CMS Hospital Professional Liability Insurance Premium Index. –– –– PPI for Pharmaceutical Preparations for Human Use (Prescriptions). PPI for Processed Foods and Feeds. CPI–U for Food Away From Home. Blend of Chemical PPIs. PPI for Medical, Surgical, and Personal Aid Devices. –– PPI for Rubber and Plastic Products. PPI for Converted Paper and Paperboard Products. PPI for Apparel. PPI for Machinery and Equipment. PPI for Finished Goods less Food and Energy. –– –– ECI for Compensation for Professional and Related Occupations. ECI for Compensation for Office and Administrative Services. ECI for Compensation for Private Service Occupations. –– ECI for Compensation for Professional and Related Occupations. ECI for Compensation for Financial Activities. CPI–U for Telephone Services. CPI–U for Postage. CPI–U for All Items less Food and Energy. –– –– BEA chained price index for nonresidential construction for hospitals and special care facilities—vintage-weighted (26 years). PPI for Machinery and Equipment—vintage-weighted (11 years). –– Average yield on domestic municipal bonds (Bond Buyer 20 bonds)—vintage-weighted (26 years). Average yield on Moody’s Aaa bonds—vintageweighted (26 years). CPI–U for Residential Rent. –– Note: Detail may not add to total due to rounding. 1 Contract Labor is distributed to Wages and Salaries and Employee Benefits based on the share of total compensation that each category represents. 2 To proxy the Chemicals cost category, we are using a blended PPI composed of the PPI for Industrial Gases, the PPI for Other Basic Inorganic Chemical Manufacturing, the PPI for Other Basic Organic Chemical Manufacturing, and the PPI for Soap and Cleaning Compound Manufacturing. For more detail about this proxy, we refer readers to section VII.D.3.c.(10) of the preamble of this final rule. In addition, we now include expenses related to Photographic Supplies in the Chemicals cost category due to the small cost weight associated with these expenses. We note that, although we are eliminating the specific cost category, these costs are still accounted for within the RPL market basket. 3 The ‘‘Professional Fees: Labor-related’’ and ‘‘Professional Fees: Nonlabor-related’’ cost categories were included in one cost category called ‘‘Professional Fees’’ in the FY 2002-based RPL market basket. For more detail about how these new categories were derived, we refer readers to section VII.D.3.f. of the preamble of this final rule on the labor-related share. 4 The Administrative and Business Support Services cost category was contained within the ‘‘All Other: Labor-intensive Services’’ cost category in the FY 2002-based RPL market basket. The ‘‘All Other: Labor-intensive Services’’ cost category is renamed the ‘‘All Other: Labor-related Services’’ cost category for the FY 2008-based RPL market basket. VerDate Mar<15>2010 19:46 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00286 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 51761 5 The ‘‘Financial Services’’ cost category was contained within the ‘‘All Other: Non-labor Intensive Services’’ cost category in the FY 2002based RPL market basket. The ‘‘All Other: Non-labor Intensive Services’’ cost category is renamed the ‘‘All Other: Nonlabor-related Services’’ cost category for the FY 2008-based RPL market basket. (1) Wages and Salaries We are using the ECI for Wages and Salaries for Hospital Workers (All Civilian) (BLS series code CIU1026220000000I) to measure the price growth of this cost category. This same proxy was used in the FY 2002based RPL market basket. (2) Employee Benefits We are using the ECI for Employee Benefits for Hospital Workers (All Civilian) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based RPL market basket. (3) Electricity We are using the PPI for Commercial Electric Power (BLS series code WPU0542). This same proxy was used in the FY 2002-based RPL market basket. (4) Fuel, Oil, and Gasoline For the FY 2002-based RPL market basket, this category only included expenses classified under North American Industry Classification System (NAICS) 21 (Mining). We used the PPI for Commercial Natural Gas (BLS series code WPU0552) as a proxy for this cost category. For the FY 2008based market basket, we added costs to this category that had previously been grouped in other categories. The added costs include petroleum-related expenses under NAICS 324110 (previously captured in the miscellaneous category), as well as petrochemical manufacturing classified under NAICS 325110 (previously captured in the chemicals category). These added costs represent 80 percent of the hospital industry’s fuel, oil, and gasoline expenses (or 80 percent of this category). Because the majority of the industry’s fuel, oil, and gasoline expenses originate from petroleum refineries (NAICS 324110), we are using the PPI for Petroleum Refineries (BLS series code PCU324110324110) as the proxy for this cost category. (5) Water and Sewage We are using the CPI for Water and Sewerage Maintenance (All Urban Consumers) (BLS series code CUUR0000SEHG01) to measure the price growth of this cost category. This same proxy was used in the FY 2002based RPL market basket. (6) Professional Liability Insurance We proxy price changes in hospital professional liability insurance premiums (PLI) using percentage changes as estimated by the CMS Hospital Professional Liability Index. To generate these estimates, we collect commercial insurance premiums for a fixed level of coverage while holding nonprice factors constant (such as a change in the level of coverage). This method is also used to proxy PLI price changes in the Medicare Economic Index (75 FR 73268). This same proxy was used in the FY 2002-based RPL market basket. (7) Pharmaceuticals We are using the PPI for Pharmaceuticals for Human Use, Prescription (BLS series code WPUSI07003) to measure the price growth of this cost category. We note that we did not make a change to the PPI that is used to proxy this cost category. Although there was a recent change to the BLS naming convention for this series, this is the same proxy that was used in the FY 2002-based RPL market basket. (8) Food: Direct Purchases We are using the PPI for Processed Foods and Feeds (BLS series code WPU02) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based RPL market basket. (9) Food: Contract Services We are using the CPI for Food Away From Home (All Urban Consumers) (BLS series code CUUR0000SEFV) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based RPL market basket. (10) Chemicals We are using a blended PPI composed of the PPI for Industrial Gas Manufacturing (NAICS 325120) (BLS series code PCU325120325120P), the PPI for Other Basic Inorganic Chemical Manufacturing (NAICS 325180) (BLS series code PCU32518–32518–), the PPI for Other Basic Organic Chemical Manufacturing (NAICS 325190) (BLS series code PCU32519–32519–), and the PPI for Soap and Cleaning Compound Manufacturing (NAICS 325610) (BLS series code PCU32561–32561–). Using the 2002 Benchmark I–O data, we found that these NAICS industries accounted for approximately 90 percent of the hospital industry’s chemical expenses. Therefore, we are using this blended index because we believe its composition better reflects the composition of the purchasing patterns of hospitals than does the PPI for Industrial Chemicals (BLS series code WPU061), the proxy used in the FY 2002-based RPL market basket. Table VII.D–3 below shows the weights for each of the four PPIs used to create the blended PPI, which we determined using the 2002 Benchmark I–O data. TABLE VII.D–3—BLENDED CHEMICAL PPI WEIGHTS Weights (in percent) Name mstockstill on DSK4VPTVN1PROD with RULES2 PPI PPI PPI PPI for for for for Industrial Gas Manufacturing ...................................................................................................................... Other Basic Inorganic Chemical Manufacturing ......................................................................................... Other Basic Organic Chemical Manufacturing ............................................................................................ Soap and Cleaning Compound Manufacturing ........................................................................................... (11) Medical Instruments We are using the PPI for Medical, Surgical, and Personal Aid Devices (BLS series code WPU156) to measure the price growth of this cost category. In the 1997 Benchmark I–O data, VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 approximately half of the expenses classified in this category were for surgical and medical instruments. Therefore, we used the PPI for Surgical and Medical Instruments and Equipment (BLS series code WPU1562) PO 00000 Frm 00287 Fmt 4701 Sfmt 4700 35 25 30 10 NAICS 325120 325180 325190 325610 to proxy this category in the FY 2002based RPL market basket. The 2002 Benchmark I–O data show that surgical and medical instruments now represent only 33 percent of these expenses and that the largest expense category is E:\FR\FM\18AUR2.SGM 18AUR2 51762 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations surgical appliance and supplies manufacturing (corresponding to BLS series code WPU1563). Due to this reallocation of costs over time, we are changing the price proxy for this cost category to the more aggregated PPI for Medical, Surgical, and Personal Aid Devices. (12) Photographic Supplies We are eliminating the cost category specific to photographic supplies for the FY 2008-based RPL market basket. These costs are now included in the Chemicals cost category because the costs are presently reported as all other chemical products. Notably, although we are eliminating the specific cost category, these costs are still accounted for within the RPL market basket. (13) Rubber and Plastics We are using the PPI for Rubber and Plastic Products (BLS series code WPU07) to measure price growth of this cost category. This same proxy was used in the FY 2002-based RPL market basket. (14) Paper and Printing Products We are using the PPI for Converted Paper and Paperboard Products (BLS series code WPU0915) to measure the price growth of this cost category. This same proxy was used in the FY 2002based RPL market basket. (15) Apparel We are using the PPI for Apparel (BLS series code WPU0381) to measure the price growth of this cost category. This same proxy was used in the FY 2002based RPL market basket. (16) Machinery and Equipment We are using the PPI for Machinery and Equipment (BLS series code WPU11) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based RPL market basket. mstockstill on DSK4VPTVN1PROD with RULES2 (17) Miscellaneous Products We are using the PPI for Finished Goods Less Food and Energy (BLS series code WPUSOP3500) to measure the price growth of this cost category. Using this index avoids the double-counting of food and energy prices, which is already captured elsewhere in the market basket. This same proxy was used in the FY 2002-based RPL market basket. (18) Professional Fees: Labor-Related We are using the ECI for Compensation for Professional and Related Occupations (Private Industry) (BLS series code CIS2020000120000I) to measure the price growth of this VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 category. It includes occupations such as legal, accounting, and engineering services. This same proxy was used in the FY 2002-based RPL market basket. (19) Administrative and Business Support Services We are using the ECI for Compensation for Office and Administrative Support Services (Private Industry) (BLS series code CIU2010000220000I) to measure the price growth of this category. Previously these costs were included in the All Other: Labor-intensive category (now renamed the All Other: Labor-related Services category), and were proxied by the ECI for Compensation for Service Occupations. We believe that this compensation index better reflects the changing price of labor associated with the provision of administrative services and its incorporation represents a technical improvement to the market basket. (20) All Other: Labor-Related Services We are using the ECI for Compensation for Service Occupations (Private Industry) (BLS series code CIU2010000300000I) to measure the price growth of this cost category. This same proxy was used in the FY 2002based RPL market basket. (21) Professional Fees: Nonlabor-Related We are using the ECI for Compensation for Professional and Related Occupations (Private Industry) (BLS series code CIS2020000120000I) to measure the price growth of this category. This is the same price proxy that we are using for the Professional Fees: Labor-related cost category. (22) Financial Services We are using the ECI for Compensation for Financial Activities (Private Industry) (BLS series code CIU201520A000000I) to measure the price growth of this cost category. Previously these costs were included in the All Other: Nonlabor-intensive category (now renamed the All Other: Nonlabor-related Services category), and were proxied by the CPI for All Items. We believe that this compensation index better reflects the changing price of labor associated with the provision of financial services and its incorporation represents a technical improvement to the market basket. (23) Telephone Services We are using the CPI for Telephone Services (BLS series code CUUR0000SEED) to measure the price growth of this cost category. This same PO 00000 Frm 00288 Fmt 4701 Sfmt 4700 proxy was used in the FY 2002-based RPL market basket. (24) Postage We are using the CPI for Postage (BLS series code CUUR0000SEEC01) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based RPL market basket. (25) All Other: Nonlabor-Related Services We are using the CPI for All Items Less Food and Energy (BLS series code CUUR0000SA0L1E) to measure the price growth of this cost category. Previously these costs were proxied by the CPI for All Items in the FY 2002based RPL market basket. We believe that using the CPI for All Items Less Food and Energy avoids the double counting of changes in food and energy prices, as they are already captured elsewhere in the market basket. Consequently, we believe that the incorporation of this proxy represents a technical improvement to the market basket. We did not receive any public comments that addressed our proposed selection of price proxies to reflect the rate of price change for each expenditure category. Therefore, we are adopting our proposal as final without modification. d. Methodology for Capital Portion of the RPL Market Basket In the FY 2002-based RPL market basket, we did not have freestanding IRF, freestanding IPF, and LTCH 2002 Medicare cost report data for the capitalrelated cost weights, due to a change in the 2002 reporting requirements. Therefore, we used these hospitals’ 2001 expenditure data for the capital cost categories of Depreciation, Interest, and Other Capital Expenses, and aged the data to a 2002 base year using relevant price proxies. For the FY 2008-based RPL market basket, as we proposed, we calculated weights for the RPL market basket capital costs using the same set of FY 2008 Medicare cost reports used to develop the operating share for IRFs, IPFs, and LTCHs. To calculate the total capital cost weight, we first applied the same length-of-stay edits as applied when calculating the operating cost weights as described above in section VII.D.3.a. of this preamble. The resulting Capital-Related weight for the FY 2008 base year is 8.392 percent. Lease expenses are unique in that they are not broken out as a separate cost category in the RPL market basket, but rather are proportionally distributed amongst the cost categories of E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Depreciation, Interest, and Other Capital-related Costs, reflecting the assumption that the underlying cost structure of leases is similar to that of capital costs in general. As was done in the FY 2002-based RPL market basket, we first assumed 10 percent of lease expenses represents overhead and assigned those costs to the Other Capital-Related Costs category accordingly. The remaining lease expenses were distributed across the three cost categories based on the respective weights of Depreciation, Interest, and Other Capital-related Costs not including lease expenses. Depreciation contains two subcategories: (1) Building and Fixed Equipment (or Fixed Assets); and (2) Movable Equipment. The apportionment between building and fixed equipment and movable equipment was determined using the FY 2008 Medicare cost reports for freestanding IRFs, freestanding IPFs, and LTCHs. This methodology was also used to compute the apportionment used in the FY 2002-based RPL market basket (71 FR 27815). The total Interest cost category is split between government/nonprofit interest and for-profit interest. The FY 2002based RPL market basket allocated 75 percent of the total Interest cost weight to Government/Nonprofit interest and proxied that category by the average yield on domestic municipal bonds. The remaining 25 percent of the Interest cost weight was allocated to For-profit interest and was proxied by the average yield on Moody’s Aaa bonds (70 FR 47912). This was based on the FY 2002based IPPS capital input price index (70 FR 23406) due to insufficient Medicare cost report data for freestanding IRFs, freestanding IPFs, and LTCHs. For the FY 2008-based RPL market basket, as we proposed, we derived the split using the FY 2008 Medicare cost report data on interest expenses for government/ nonprofit and for-profit freestanding IRFs, freestanding IPFs, and LTCHs. Based on these data, we calculated a 33/ 67 split between government/nonprofit and for-profit interest. We believe it is important that this split reflects the latest relative cost structure of interest expenses for RPL providers. As stated above, we first applied the average length of stay edits (as described in section VII.D.3.a. of this preamble) prior to calculating this split. Therefore, we used cost reports that are reflective of case mix and practice patterns associated with providing services to Medicare beneficiaries. Using data specific to government/nonprofit and for-profit freestanding IRFs, freestanding IPFs, and LTCHs as well as the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 application of these length of stay edits are the primary reasons for the difference in this split relative to the FY 2002-based RPL market basket. Because capital is acquired and paid for over time, capital expenses in any given year are determined by both past and present purchases of physical and financial capital. The vintage-weighted capital portion of the FY 2008-based RPL market basket is intended to capture the long-term consumption of capital, using vintage weights for depreciation (physical capital) and interest (financial capital). These vintage weights reflect the proportion of capital purchases attributable to each year of the expected life of building and fixed equipment, movable equipment, and interest. We used the vintage weights to compute vintage-weighted price changes associated with depreciation and interest expense. Vintage weights are an integral part of the FY 2008-based RPL market basket. Capital costs are inherently complicated and are determined by complex capital purchasing decisions, over time, based on such factors as interest rates and debt financing. In addition, capital is depreciated over time instead of being consumed in the same period it is purchased. The capital portion of the FY 2008-based RPL market basket would reflect the annual price changes associated with capital costs, and would be a useful simplification of the actual capital investment process. By accounting for the vintage nature of capital, we are able to provide an accurate and stable annual measure of price changes. Annual nonvintage price changes for capital are unstable due to the volatility of interest rate changes and, therefore, do not reflect the actual annual price changes for Medicare capital-related costs. The capital component of the FY 2008-based RPL market basket would reflect the underlying stability of the capital acquisition process and provides hospitals with the ability to plan for changes in capital payments. To calculate the vintage weights for depreciation and interest expenses, we needed a time series of capital purchases for building and fixed equipment and movable equipment. We found no single source that provides an appropriate time series of capital purchases by hospitals for all of the above components of capital purchases. The early Medicare cost reports did not have sufficient capital data to meet this need. Data we obtained from the American Hospital Association (AHA) do not include annual capital purchases. However, AHA does provide a consistent database back to 1963. We PO 00000 Frm 00289 Fmt 4701 Sfmt 4700 51763 used data from the AHA Panel Survey and the AHA Annual Survey to obtain a time series of total expenses for hospitals. We then used data from the AHA Panel Survey supplemented with the ratio of depreciation to total hospital expenses obtained from the Medicare cost reports to derive a trend of annual depreciation expenses for 1963 through 2008. In order to estimate capital purchases using data on depreciation expenses, the expected life for each cost category (building and fixed equipment, movable equipment, and interest) is needed to calculate vintage weights. For the FY 2002-based RPL market basket, due to insufficient Medicare cost report data for freestanding IRFs, freestanding IPFs, and LTCHs, we used 2001 Medicare cost reports for IPPS hospitals to determine the expected life of building and fixed equipment and movable equipment (71 FR 27816). The FY 2002-based RPL market basket was based on an expected average life of building and fixed equipment of 23 years. It used 11 years as the average expected life for moveable equipment. We believed that this data source reflected the latest relative cost structure of depreciation expenses for hospitals at the time and was analogous to freestanding IRFs, freestanding IPFs, and LTCHs. The expected life of any asset can be determined by dividing the value of the asset (excluding fully depreciated assets) by its current year depreciation amount. This calculation yields the estimated useful life of an asset if depreciation were to continue at current year levels, assuming straight-line depreciation. Following a similar method to what was applied for the FY 2002-based RPL market basket, we used the average expected life of building and fixed equipment to be equal to 26 years, and the average expected life of movable equipment to be 11 years. These expected lives are calculated using FY 2008 Medicare cost reports for IPPS hospitals since we are currently unable to obtain robust measures of the expected lives for building and fixed equipment and movable equipment using the Medicare cost reports from freestanding IRFs, freestanding IPFs, and LTCHs. As we proposed, we also used the building and fixed equipment and movable equipment weights derived from FY 2008 Medicare cost reports for freestanding IRFs, freestanding IPFs, and LTCHs to separate the depreciation expenses into annual amounts of building and fixed equipment depreciation and movable equipment depreciation. Year-end asset costs for building and fixed equipment and E:\FR\FM\18AUR2.SGM 18AUR2 51764 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations movable equipment were determined by multiplying the annual depreciation amounts by the expected life calculations. We then calculated a time series, back to 1963, of annual capital purchases by subtracting the previous year asset costs from the current year asset costs. From this capital purchase time series, we were able to calculate the vintage weights for building and fixed equipment and for movable equipment. Each of these sets of vintage weights is explained in more detail below. For the building and fixed equipment vintage weights, we used the real annual capital purchase amounts for building and fixed equipment to capture the actual amount of the physical acquisition, net of the effect of price inflation. This real annual purchase amount for building and fixed equipment was produced by deflating the nominal annual purchase amount by the building and fixed equipment price proxy, BEA’s chained price index for nonresidential construction for hospitals and special care facilities. Because building and fixed equipment have an expected life of 26 years, the vintage weights for building and fixed equipment are deemed to represent the average purchase pattern of building and fixed equipment over 26-year periods. With real building and fixed equipment purchase estimates available from 2008 back to 1963, we averaged twenty 26-year periods to determine the average vintage weights for building and fixed equipment that are representative of average building and fixed equipment purchase patterns over time. Vintage weights for each 26-year period are calculated by dividing the real building and fixed capital purchase amount in any given year by the total amount of purchases in the 26-year period. This calculation is done for each year in the 26-year period, and for each of the twenty 26-year periods. We used the average of each year across the twenty 26-year periods to determine the average building and fixed equipment vintage weights for the FY 2008-based RPL market basket. For the movable equipment vintage weights, the real annual capital purchase amounts for movable equipment were used to capture the actual amount of the physical acquisition, net of price inflation. This real annual purchase amount for movable equipment was calculated by deflating the nominal annual purchase amounts by the movable equipment price proxy, the PPI for Machinery and Equipment. This is the same proxy used for the FY 2002-based RPL market basket. Based on our determination that movable equipment has an expected life of 11 years, the vintage weights for movable equipment represent the average expenditure for movable equipment over an 11-year period. With real movable equipment purchase estimates available from 2008 back to 1963, thirty-five 11-year periods were averaged to determine the average vintage weights for movable equipment that are representative of average movable equipment purchase patterns over time. Vintage weights for each 11year period are calculated by dividing the real movable capital purchase amount for any given year by the total amount of purchases in the 11-year period. This calculation was done for each year in the 11-year period and for each of the thirty-five 11-year periods. We used the average of each year across the thirty-five 11-year periods to determine the average movable equipment vintage weights for the FY 2008-based RPL market basket. For the interest vintage weights, the nominal annual capital purchase amounts for total equipment (building and fixed, and movable) were used to capture the value of the debt instrument. Because we have determined that hospital debt instruments have an expected life of 26 years, the vintage weights for interest are deemed to represent the average purchase pattern of total equipment over 26-year periods. With nominal total equipment purchase estimates available from 2008 back to 1963, twenty 26-year periods were averaged to determine the average vintage weights for interest that are representative of average capital purchase patterns over time. Vintage weights for each 26-year period are calculated by dividing the nominal total capital purchase amount for any given year by the total amount of purchases in the 26-year period. This calculation is done for each year in the 26-year period and for each of the twenty 26-year periods. We used the average of each year across the twenty 26-year periods to determine the average interest vintage weights for the FY 2008-based RPL market basket. The vintage weights for the capital portion of the FY 2002-based RPL market basket and the FY 2008based RPL market basket are presented in Table VII.D–4 below. TABLE VII.D–4—FY 2002 AND FY 2008 VINTAGE WEIGHTS FOR CAPITAL-RELATED PRICE PROXIES Building and fixed equipment mstockstill on DSK4VPTVN1PROD with RULES2 Year FY 2002 23 years 1 ............................................................... 2 ............................................................... 3 ............................................................... 4 ............................................................... 5 ............................................................... 6 ............................................................... 7 ............................................................... 8 ............................................................... 9 ............................................................... 10 ............................................................. 11 ............................................................. 12 ............................................................. 13 ............................................................. 14 ............................................................. 15 ............................................................. 16 ............................................................. 17 ............................................................. 18 ............................................................. 19 ............................................................. 20 ............................................................. 21 ............................................................. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 0.021 0.022 0.025 0.027 0.029 0.031 0.033 0.035 0.038 0.040 0.042 0.045 0.047 0.049 0.051 0.053 0.056 0.057 0.058 0.060 0.060 PO 00000 Frm 00290 FY 2008 26 years Interest FY 2002 11 years 0.021 0.023 0.025 0.027 0.028 0.030 0.031 0.033 0.035 0.037 0.039 0.041 0.042 0.043 0.044 0.045 0.046 0.047 0.047 0.045 0.045 Fmt 4701 Movable equipment FY 2008 11 years 0.065 0.071 0.077 0.082 0.086 0.091 0.095 0.100 0.106 0.112 0.117 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 0.071 0.075 0.080 0.083 0.085 0.089 0.092 0.098 0.103 0.109 0.116 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 FY 2002 23 years 0.010 0.012 0.014 0.016 0.019 0.023 0.026 0.029 0.033 0.036 0.039 0.043 0.048 0.053 0.056 0.059 0.062 0.064 0.066 0.070 0.071 FY 2008 26 years 0.010 0.012 0.014 0.016 0.018 0.020 0.021 0.024 0.026 0.029 0.033 0.035 0.038 0.041 0.043 0.046 0.049 0.052 0.053 0.053 0.055 51765 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations TABLE VII.D–4—FY 2002 AND FY 2008 VINTAGE WEIGHTS FOR CAPITAL-RELATED PRICE PROXIES—Continued Building and fixed equipment Year 22 23 24 25 26 FY 2002 23 years ............................................................. ............................................................. ............................................................. ............................................................. ............................................................. Total .................................................. 0.061 0.061 ........................ ........................ ........................ 1.000 FY 2008 26 years Movable equipment Interest FY 2002 11 years 0.045 0.046 0.046 0.045 0.046 1.000 FY 2008 11 years FY 2002 23 years ........................ ........................ ........................ ........................ ........................ 1.000 ........................ ........................ ........................ ........................ ........................ 1.000 FY 2008 26 years 0.074 0.076 ........................ ........................ ........................ 1.000 0.056 0.060 0.063 0.064 0.068 1.000 Note: Numbers may not add to total due to rounding. After the Capital cost category weights were computed, it was necessary to select appropriate price proxies to reflect the rate-of-increase for each expenditure category. We use the same price proxies for the capital portion of the FY 2008-based RPL market basket that were used in the FY 2002-based RPL market basket with the exception of the Boeckh Construction Index. We replaced the Boeckh Construction Index with BEA’s Chained Price Index for Nonresidential Construction for Hospitals and Special Care Facilities. The BEA index represents construction of facilities such as hospitals, nursing homes, hospices, and rehabilitation centers. Although these price indices move similarly over time, we believe that it is more technically appropriate to use an index that is more specific to the hospital industry. We believe these are the most appropriate proxies for hospital capital costs that meet our selection criteria of relevance, timeliness, availability, and reliability. The price proxies (prior to any vintage weighting) for each of the capital cost categories are the same as those used for the FY 2006-based Capital Input Price Index (CIPI) as described in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857). e. FY 2012 Market Basket Update for LTCHs For FY 2012 (that is, October 1, 2011 through September 30, 2012), as we proposed, we are using an estimate of the FY 2008-based RPL market basket update based on the best available data. Consistent with historical practice, we estimate the RPL market basket update for the LTCH PPS based on IHS Global Insight, Inc.’s (IGI’s) forecast using the most recent available data. IGI is a nationally recognized economic and financial forecasting firm that contracts with CMS to forecast the components of the market baskets. Based on IGI’s first quarter 2011 forecast with history through the fourth quarter of 2010, the projected market basket update for FY 2012 was 2.8 percent. Therefore, consistent with our historical practice of estimating market basket increases based on the best available data, we proposed a market basket update of 2.8 percent for FY 2012. We also proposed that if more recent data became subsequently available (for example, a more recent estimate of the market basket), we would use such data, if appropriate, to determine the FY 2012 annual update in the final rule. For this final rule, we are incorporating a more recent estimate of the market basket update and MFP adjustment. Based on IGI’s second quarter 2011 forecast with history through the first quarter of 2011, the projected market basket update for FY 2012 is 2.9 percent. Therefore, consistent with our historical practice of estimating market basket increases based on the best available data, we are finalizing a market basket update of 2.9 percent for FY 2012. (As discussed in greater detail in section V.A.2. of the Addendum to this final rule, we are providing for an annual update of 1.8 percent to the LTCH PPS standard Federal rate for FY 2012 under § 412.523(c)(3)(viii) of the regulations.) Using the FY 2002-based RPL market basket and IGI’s second quarter 2011 forecast for the market basket components, the FY 2012 market basket update would be 3.0 percent (before taking into account any statutory adjustment). Table VII.D–5 below compares the FY 2008-based RPL market basket and the FY 2002-based RPL market basket percent changes. TABLE VII.D–5—FY 2002-BASED AND FY 2008-BASED RPL MARKET BASKET PERCENT CHANGES; FY 2006 THROUGH FY 2014 FY 2002-Based RPL market basket index percent change mstockstill on DSK4VPTVN1PROD with RULES2 Fiscal year (FY) Historical data: FY 2006 ............................................................................................................................ FY 2007 ............................................................................................................................ FY 2008 ............................................................................................................................ FY 2009 ............................................................................................................................ FY 2010 ............................................................................................................................ Average 2006–2010 ......................................................................................................... Forecast: FY 2011 ............................................................................................................................ FY 2012 ............................................................................................................................ FY 2013 ............................................................................................................................ FY 2014 ............................................................................................................................ Average 2011–2014 ......................................................................................................... FY 2008-Based RPL market basket index percent change 3.9 3.4 3.8 2.5 2.3 3.2 3.7 3.4 3.7 2.7 2.2 3.1 2.7 3.0 3.0 3.0 2.9 2.7 2.9 2.9 3.0 2.9 Note that these market basket percent changes do not include any further adjustments as may be statutorily required. Source: IHS Global Insight, Inc. second quarter 2011 forecast. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00291 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 51766 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 For FY 2012, the FY 2008-based RPL market basket update (2.9 percent) is slightly lower than the market basket update based on the FY 2002-based RPL market basket. The lower total compensation weight in the FY 2008based RPL market basket (62.278 percent) relative to the FY 2002-based RPL market basket (65.877 percent), absent other factors, would have resulted in a slightly lower market basket update using the FY 2008-based RPL market basket. However, this impact is partially offset by the larger weight associated with the Professional Fees category. In both market baskets, these expenditures are proxied by the ECI for Compensation for Professional and Related Services. The weight for Professional Fees in the FY 2002-based RPL market basket is 2.892 percent compared to 6.325 percent in the FY 2008-based RPL market basket. The net effect is that the market basket update is slightly lower for FY 2012 based on the FY 2008-based RPL market basket relative to the FY 2002-based RPL market basket. f. Labor-Related Share 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 (§ 412.525(c)). The labor-related portion of the LTCH PPS standard 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 total 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 labor-intensive and vary with the local labor market. Given this, based on our definition of the labor-related share, we include in the labor-related share the sum of the relative importance of Wages and Salaries, Employee Benefits, Professional Fees: Labor-related, Administrative and Business Support Services, All Other: Labor-related Services (previously referred to in the FY 2002-based RPL market basket as labor-intensive), and a portion of the Capital-Related cost weight. Consistent with previous rebasings, the All Other: Labor-related Services cost category is mostly comprised of building maintenance and security services (including, but not limited to, commercial and industrial machinery VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 and equipment repair, nonresidential maintenance and repair, and investigation and security services). Because these services tend to be laborintensive and are mostly performed at the hospital facility (and, therefore, unlikely to be purchased in the national market), we believe that they meet our definition of labor-related services. As stated in the RY 2007 LTCH PPS final rule (71 FR 27829), the laborrelated share was defined as the sum of the relative importance of the laborrelated share of operating costs (Wages and Salaries, Employee Benefits, Professional Fees, and All Other: Laborintensive Services), and a portion of Capital costs of the RPL market basket based on FY 2002 data. Therefore, to determine the labor-related share for the LTCH PPS for FY 2011, we used the FY 2002-based RPL market basket cost weights relative importance to determine the labor-related share for the LTCH PPS. For the FY 2008-based RPL market basket rebasing, the inclusion of the Administrative and Business Support Services cost category into the laborrelated share remains consistent with the current labor-related share because this cost category was previously included in the Labor-intensive cost category. As previously stated, we established a separate Administrative and Business Support Service cost category so that we can use the ECI for Compensation for Office and Administrative Support Services to more precisely proxy these specific expenses. For the FY 2002-based RPL market basket, we assumed that all nonmedical professional services (including accounting and auditing services, engineering services, legal services, and management and consulting services) were purchased in the local labor market and, therefore, all of their associated fees varied with the local labor market. As a result, we previously included 100 percent of these costs in the labor-related share. In an effort to more accurately determine the share of professional fees that should be included in the labor-related share, we surveyed hospitals regarding the proportion of those fees that go to companies that are located beyond their own local labor market (the results are discussed below). We continue to look for ways to refine our market basket approach to more accurately account for the proportion of costs influenced by the local labor market. To that end, we conducted a survey of hospitals to empirically determine the proportion of contracted professional services purchased by the PO 00000 Frm 00292 Fmt 4701 Sfmt 4700 industry that are attributable to local firms and the proportion that are purchased from national firms. We notified the public of our intent to conduct this survey on December 9, 2005 (70 FR 73250) and received no comments. With approval from the Office of Management and Budget (OMB), we contacted a sample of IPPS hospitals and received responses to our survey from 108 hospitals. We believe that these data serve as an appropriate proxy for the purchasing patterns of professional services for LTCHs as they are also institutional providers of health care services. Using data on full-time equivalents (FTEs) to allocate responding hospitals across strata (region of the country and urban/rural status), we calculated post-stratification weights. Based on these weighted results, we determined that hospitals purchase, on average, the following portions of contracted professional services outside of their local labor market: • 34 percent of accounting and auditing services. • 30 percent of engineering services. • 33 percent of legal services. • 42 percent of management consulting services. We applied each of these percentages to its respective Benchmark I–O cost category underlying the professional fees cost category to determine the Professional Fees: Nonlabor-related costs. The Professional Fees: Laborrelated costs were determined to be the difference between the total costs for each Benchmark I–O category and the Professional Fees: Nonlabor-related costs. This is the methodology that we used to separate the FY 2008-based RPL market basket professional fees category into Professional Fees: Labor-related and Professional Fees: Nonlabor-related cost categories. In addition to the professional services listed above, we also classified expenses under NAICS 55, Management of Companies and Enterprises, into the Professional Fees cost category as was done in previous rebasings. The NAICS 55 data are mostly comprised of corporate, subsidiary, and regional managing offices, or otherwise referred to as home offices. Formerly, all of the expenses within this category were considered to vary with, or be influenced by, the local labor market and were thus included in the laborrelated share. Because many hospitals are not located in the same geographic area as their home office, we analyzed data from a variety of sources in order to determine what proportion of these E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations costs should be appropriately included in the labor-related share. Using data primarily from the Medicare cost reports and a CMS database of Home Office Medicare Records (HOMER) (a database that provides city and state information (addresses) for home offices), we were able to determine that 19 percent of the total number of freestanding IRFs, freestanding IPFs, and LTCHs that had home offices had those home offices located in their respective local labor markets—defined as being in the same Metropolitan Statistical Area (MSA). The Medicare cost report requires hospitals to report their home office provider numbers. Using the HOMER database to determine the home office location for each home office provider number, we compared the location of the provider with the location of the hospital’s home office. We then placed providers into one of the following three groups: • Group 1—Provider and home office are located in different States. • Group 2—Provider and home office are located in the same State and same city. • Group 3—Provider and home office are located in the same State and different city. We found that 63 percent of the providers with home offices were classified into Group 1 (that is, different State) and, thus, these providers were determined to not be located in the same local labor market as their home office. Although there were a very limited number of exceptions (that is, providers located in different States but the same MSA as their home office), the 63 percent estimate was unchanged. We found that 9 percent of all providers with home offices were classified into Group 2 (that is, same State and same city and, therefore, the same MSA). Consequently, these providers were determined to be located in the same local labor market as their home offices. We found that 27 percent of all providers with home offices were classified into Group 3 (that is, same State and different city). Using data from the Census Bureau to determine the specific MSA for both the provider and its home office, we found that 10 percent of all providers with home offices were identified as being in the same State, a different city, but the same MSA. Pooling these results, we were able to determine that approximately 19 percent of providers with home offices had home offices located within their 51767 local labor market (that is, 9 percent of providers with home offices had their home offices in the same State and city (and, thus, the same MSA), and 10 percent of providers with home offices had their home offices in the same State, a different city, but the same MSA). We apportion the NAICS 55 expense data by this percentage. Thus, we classified 19 percent of these costs into the Professional Fees: Labor-related cost category and the remaining 81 percent into the Professional Fees: Nonlaborrelated Services cost category. Using this method and the IGI’s forecast for the first quarter 2011 of the FY 2008-based RPL market basket, the proposed LTCH labor-related share for FY 2012 was the sum of the FY 2012 relative importance of each labor-related cost category. Consistent with our policy for updating the labor-related share with the most recent available data, the labor-related share for this final rule reflects IGI’s second quarter 2011 forecast of the FY 2008-based RPL market basket. Table VII.D–6 below shows the FY 2012 relative importance labor-related share using the FY 2008based RPL market basket and the FY 2011 relative importance labor-related share using the FY 2002-based RPL market basket. TABLE VII.D–6—COMPARISON OF THE FY 2011 RELATIVE IMPORTANCE LABOR-RELATED SHARE BASED ON THE FY 2002-BASED RPL MARKET BASKET AND THE FY 2012 RELATIVE IMPORTANCE LABOR-RELATED SHARE BASED ON THE FY 2008-BASED RPL MARKET BASKET FY 2011 Relative importance laborrelated share 1 FY 2012 Relative importance laborrelated share 2 Wages and Salaries ................................................................................................................................ Employee Benefits ................................................................................................................................... Professional Fees: Labor-Related ........................................................................................................... Administrative and Business Support Services ....................................................................................... All Other: Labor-Related Services ........................................................................................................... 52.449 13.971 2.855 ................................ 2.109 48.984 12.998 2.072 0.416 2.094 Subtotal ............................................................................................................................................. Labor-Related Portion of Capital Costs (46%) ........................................................................................ 71.384 3.887 66.564 3.635 Total Labor-Related Share ............................................................................................................... 75.271 70.199 1 Published mstockstill on DSK4VPTVN1PROD with RULES2 2 Based in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50391) and based on the second quarter 2010 IGI forecast. on the second quarter 2011 IGI forecast. The labor-related share for FY 2012 is the sum of the FY 2012 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 2008) and FY 2012. The sum of the relative importance for FY 2012 for operating costs (Wages and Salaries, Employee Benefits, Professional Fees: Labor-Related, Administrative and Business Support Services, and All Other: Labor-related Services) is 66.564 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 percent, as shown in Table VII.D–6 above. We are providing that the portion of Capital that is influenced by the local labor market is estimated to be 46 percent, which is the same percentage applied to the FY 2002-based RPL market basket. Because the relative importance for Capital-Related Costs is 7.903 percent of the FY 2008-based RPL market basket in FY 2012, we multiplied 46 percent by 7.903 percent to determine the labor-related share of Capital for FY 2012. The result is 3.635 PO 00000 Frm 00293 Fmt 4701 Sfmt 4700 percent, which we added to 66.564 percent for the operating cost amount to determine the total labor-related share for FY 2012. Thus, the labor-related share that we are using for the LTCH PPS in FY 2012 is 70.199 percent. This labor-related share is determined using the same methodology as employed in calculating all previous LTCH laborrelated shares. Comment: Several commenters questioned the 5-percentage point reduction in the labor-related share E:\FR\FM\18AUR2.SGM 18AUR2 51768 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations (from approximately 75 to approximately 70 percent) for the LTCH PPS, after the labor-related share has been relatively constant over the last several years. One commenter stated that this 5-percentage point reduction in the labor-related share, at one time, will have a substantial adverse impact. The commenters requested that CMS not use limited size data that result in the revision of the FY 2012 labor-related share by nearly 5 percentage points. One commenter remarked that the reduction reflects a dramatic change in the laborrelated share from one year to the next. Response: The reduction in the laborrelated share from FY 2011 to FY 2012 is primarily the result of rebasing the RPL market basket from a FY 2002 base year to a FY 2008 base year, and reflects use of a more recent cost structure of freestanding IRFs, freestanding IPFs, and LTCHs. As displayed in Table VII.D–2, the rebasing of the RPL market basket from a FY 2002 base year to a FY 2008 base year resulted in a decrease in the compensation cost weight of approximately 3.6 percentage points from 65.877 percent to 62.278 percent. We found during our most recent rebasing process that the compensation cost weight had begun to gradually decrease over the time period from 2003 to 2008. The decrease in the base year compensation cost weight is accounting for over three-quarters of the total decrease from the FY 2011 labor-related share and the FY 2012 labor-related share (of approximately 5 percentage points). The remaining decrease in the labor-related share is primarily the result of the treatment of professional fees as labor-related or nonlabor-related. The FY 2012 labor-related share reflects the most recently available and complete set of Medicare cost reports, and thus reflects the updated and appropriate proportion of costs that are related to, influenced by, or vary with the local labor market for IRFs, IPFs, and LTCHs. Comment: One commenter specifically called into question the methodology used for estimating the allocation of professional fees; specifically stating concerns that the sample size used was too small (108 hospitals), the survey results may be old and no longer valid, that there is no indication that CMS conducted a statistically valid sample for estimating the allocation of professional fees, and that it would have been more appropriate for CMS to survey LTCH’s for this information. Response: We disagree with the commenter’s rationale in regard to the calculation of the labor-related share for FY 2012. A method that distributes professional fees based on empirical research and data represents a technical improvement to the construction of the market basket, where previously 100 percent of professional fees were assumed to vary with the local labor market. The actual survey results are for the year 2008, and are the most recent data available at the time of this final rule. In response to the concerns about the sample size of 108 hospitals and the validity of the survey results, we provide more detail on the survey conducted below. We note that these same survey results were used in the IPPS market basket rebasing for the FY 2010 IPPS final rule (74 FR 43853) and the RPL market basket rebasing for the FY 2012 IPF final rule (76 FR 26445 through 26447). The survey’s methods unfolded in the following manner: Through an independent contractor, a small sample of 12 hospitals were initially pre-tested in order to ensure the understandability of the survey questions. The survey prompted sample institutions to select from multiple choice answers the proportions of their professional fees that are purchased from firms located outside of their respective local labor market. The multiple choice answers for each type of professional service included the following options: 0 percent of fees; 1–20 percent of fees; 21– 40 percent of fees; 41–60 percent of fees; 61–80 percent of fees; 81–99 percent of fees; and 100 percent of fees. All respondents were assured that the information they provided would be kept strictly confidential. Understanding that larger, urbanbased hospitals (and those located in areas with area wage indexes greater than 1.0) are most likely to be impacted by the survey’s results, we used data on full-time equivalents (FTEs) to represent the sizes of hospitals and selected hospitals with probability proportional to their sizes across strata when drawing the full sample. Strata were formed by Census Region and Urban/Rural Status. The distributions of the hospital population, as well as weighted distributions for the responders, by Urban/Rural Status (including data on hospital size) and Census Region were as follows: All hospitals percent distribution and average FTE size mstockstill on DSK4VPTVN1PROD with RULES2 Total Total Total Total Total Total Total ......................................................................................................................................................... Rurals ............................................................................................................................................. Urbans ............................................................................................................................................ Northeast Region ............................................................................................................................ Mid-West Region ............................................................................................................................ South Region .................................................................................................................................. West Region ................................................................................................................................... Sample weights were calculated as the inverse of the selection probability and were subsequently adjusted for nonresponse bias by strata and poststratified to derive final weights. This type of application represents a common survey approach and is based on valid and widely-accepted statistical techniques. For the estimates of the nationwide proportion of nonmedical professional VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 services fees purchased outside of the local labor market, we first examined the data on multiple levels. First, we found that fewer than 30 percent of the responding hospitals paid 100 percent of their professional fees to vendors located within their local labor market. Conversely, we found that roughly 20 percent of responding hospitals reported that 81 percent or more of their professional services fees are paid to PO 00000 Frm 00294 Fmt 4701 Sfmt 4700 100%/994 30%/388 70%/1,255 15%/1,442 23%/1,062 42%/843 20%/899 Responding hospitals percent distribution and average FTE size 100%/1,156 25%/449 75%/1,460 20%/1,078 24%/1,656 37%/944 19%/1,081 vendors located outside of their local labor market. In determining the specific and appropriate proportions of professional fees to consider labor-related and nonlabor-related, we generated weighted averages from the data in the following manner: • For any multiple choice answer where the standard error associated with the weighted counts for that E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations answer was less than 30 percent, we multiplied the weighted counts associated with that answer by the midpoint of the range within that answer. For example, for Accounting and Auditing services, if a weighted count of 500 hospitals responded that they pay ‘‘1 to 20 percent’’ of their professional fees for these services to firms located outside of their local labor market, we would multiply 500 times 10 percent. We repeat this for each possible multiple choice answer. • For any multiple choice answer where the standard error associated with the weighted counts for that answer exceeded 30 percent, we multiplied the weighted hospital counts by the low point of the range. Using a similar example as above, if a weighted count of 300 hospitals responded that they pay ‘‘1 to 20 percent’’ of their professional fees for these services to firms located outside of their local labor market, and the standard error on that estimate was greater than 30 percent, we would multiply 300 times 1 percent. • After applying one of these two techniques to each answer, dependent on its associated standard error, we took a weighted average of the results to determine the final proportion to be excluded from the labor-related share for each of the four types of professional services surveyed. Given the information provided above, we believe that the estimates based on this survey are valid. Comment: One commenter recommended that CMS phase in this change in the labor-related share over a 2- to 3-year period to allow LTCHs a longer period of time to absorb the impact of this reduction to the laborrelated share. Response: We do not agree with this recommendation. In this final rule we are finalizing our methodology for calculating the labor-related share for FY 2012 using the FY 2008-based RPL market basket and the most recent forecast data available (which is IHS Global Insight Inc.’s second quarter 2011 forecast). This is also the same forecast we are using to derive the FY 2012 market basket update for this final rule. As the updated labor-related share reflects the current proportion of costs that are related to, vary with, or influenced by the local labor market, we believe it is appropriate to incorporate the results in full into the FY 2012 payment update. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 E. Changes to the LTCH Payment Rates and Other Changes to the FY 2012 LTCH PPS 1. Overview of Development of the LTCH Payment Rates The LTCH PPS was effective beginning with a LTCH’s first cost reporting period beginning on or after October 1, 2002. Therefore, beginning with their FY 2003 cost reporting period, LTCHs were paid, during a 5year 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)) were 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 we use to update the LTCH PPS standard Federal rate for FY 2012, that is, effective for LTCH discharges occurring on or after October 1, 2011 through September 30, 2012. 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 (68 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); RY 2010 LTCH PPS final rule (74 FR 44021 through 44030); and FY 2011 IPPS/LTCH PPS final rule (75 FR 50443 through 50444). The update to the LTCH PPS standard Federal rate for FY 2012 is presented in section V.A. of the Addendum to this final rule. The components of the annual market basket update to the LTCH PPS standard Federal rate for FY 2012 are discussed below. In addition, as discussed below in section VII.E.3. of this preamble, beginning in FY 2012, in addition to the update factor, we make an adjustment to the standard Federal rate to account for the estimated effect of any changes to the area wage level PO 00000 Frm 00295 Fmt 4701 Sfmt 4700 51769 adjustment on estimated aggregate LTCH PPS payments. 2. FY 2012 LTCH PPS Annual Market Basket Update 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). (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).) 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). 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).) As discussed in greater detail in section VII.D. of this preamble, we are revising and rebasing the market basket used under the LTCH PPS for FY 2012. Specifically, we are adopting a newly created FY 2008-based RPL market basket (described in section VII.D. of this preamble). Also, in section VII.D. of this preamble, we discuss our continued interest in exploring the possibility of creating a stand-alone LTCH market basket that reflects the cost structures of only LTCH providers. E:\FR\FM\18AUR2.SGM 18AUR2 51770 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations b. Revision of Certain Market Basket Updates as Required by the Affordable Care Act Several provisions of the Affordable Care Act affect the policies and payment rates under the LTCH PPS. Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of the Affordable Care Act, specifies that, for rate year 2010 and each subsequent rate year through 2019, any annual update to the standard Federal rate shall be reduced: • For rate year 2010 through 2019, by the other adjustment specified in sections 1886(m)(3)(A)(ii) and (m)(4) of the Act; and • For rate year 2012 and each subsequent year, by the productivity adjustment (which we refer to as ‘‘the multifactor productivity (MFP) adjustment’’ as discussed in section VII.E.2.d. of this preamble) described in section 1886(b)(3)(B)(xi)(II) of the Act. 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. We note that because the annual update to the LTCH PPS policies, rates, and factors now occurs on October 1, we have adopted 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 (75 FR 50396 through 50397). Although the language of sections 3401(c), 10319, and 1105(b) of the Affordable Care Act refers to years 2010 and thereafter under the LTCH PPS as ‘‘rate year,’’ consistent with our change in the terminology used under the LTCH PPS from ‘‘rate year’’ to ‘‘fiscal year,’’ for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we employ ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years. mstockstill on DSK4VPTVN1PROD with RULES2 c. Market Basket Under the LTCH PPS for FY 2012 As noted above and as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50389), when we initially created the FY 2002-based RPL market basket, we were unable to create a separate market basket specifically for LTCHs due, in part, to the small number of facilities and the limited data that were provided in the Medicare cost reports. Over the last several years, however, the number of LTCHs submitting valid VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 have begun to explore 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, we do not believe it is appropriate at this time to propose stand-alone market baskets for IRFs, IPFs, and LTCHs, and we believe that it is appropriate to continue to use the RPL market basket for LTCHs, IRFs, and IPFs under their respective PPSs. We continue to believe that the RPL market basket appropriately reflects the cost structure of LTCHs, 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). For the reasons explained above, as we proposed, we are continuing to use the RPL market basket under the LTCH PPS for FY 2012. However, as discussed in greater detail in section VII.D. of this preamble, we are finalizing our proposal to rebase and revise the FY 2002-based RPL market basket by creating a FY 2008-based RPL market basket. As we discussed in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26006), currently, we are exploring the viability of creating two separate market baskets from the current RPL market basket: One market basket would include freestanding IRFs and freestanding IPFs and would be used to update payments under both the IPF and IRF payment systems. The other market basket would be a stand-alone LTCH market basket. Depending on the outcome of our research, we may propose a stand-alone LTCH market basket in the next LTCH PPS update cycle. In that same proposed rule, we invited public comment on the possibility of using this type of market basket to update LTCH payments in the future. Under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, we proposed to use the FY 2008-based RPL market basket (described in section VII.D. of this preamble) under the LTCH PPS for FY 2012, which we continue to believe PO 00000 Frm 00296 Fmt 4701 Sfmt 4700 appropriately reflects the cost structure of LTCHs. Comment: One commenter supported CMS’ work to rebase and revise the market basket used for LTCHs, and asked if it would be possible to identify separate LTCH market baskets for hospitals-within-hospitals and freestanding facilities, further stating that CMS mentions there are cost differences between free standing IPFs and hospital-based IPF facilities, and also for IRF facilities, but CMS does not make the same statement for LTCHs. The commenter asked if this is an ongoing item of study, or if it is CMS’ belief that there are no cost differences between freestanding LTCHs and hospital-within-hospital LTCHs. The commenter encouraged CMS to consider having a differentiation for freestanding LTCHs and hospital-within-hospital LTCHs. Response: The FY 2008-based RPL market basket reflects all LTCH facilities, including both freestanding LTCHs and hospitals-within-hospitals. We are continuing to analyze all aspects of a possible stand-alone LTCH market basket, including the contributions of hospital-within-hospital LTCHs on such a market basket. Any future changes to the market basket used to update LTCHs, including the possible introduction of a LTCH-specific market basket, would be proposed and subject to notice and comment rulemaking. Comment: Several commenters supported CMS’ work to rebase and revise the FY 2002-based RPL market basket to a FY 2008-based RPL market basket. These commenters also stated their support for CMS’ inclusion of LTCH cost reports to develop the FY 2008-based RPL market basket. Response: We appreciate the support for this policy. As we proposed, in this final rule, we are finalizing our proposed methods for rebasing and revising the RPL market basket to a FY 2008-based RPL market basket. d. Productivity Adjustment Section 1886(m)(3)(A)(i) of the Act specifies that, for FY 2012 and subsequent 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(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the Affordable Care Act, defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10year period ending with the applicable fiscal year, calendar year, cost reporting E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations period, or other annual period) (the ‘‘MFP adjustment’’). The Bureau of Labor Statistics (BLS) is the agency that publishes the official measure of private non-farm business MFP. We refer readers to the BLS Web site at https:// www.bls.gov/mfp to obtain the BLS historical published MFP data. The MFP adjustment that is applied in determining any annual update to the LTCH PPS standard Federal rate is the same adjustment that is required to be applied in determining the applicable percentage increase under the IPPS under section 1886(b)(3)(B)(i) of the Act. As described in section IV.K.3. of this preamble, we derived the FY 2012 MFP adjustment applied to the operating IPPS applicable percentage increase using a projection of MFP that is currently produced by IHS Global Insight, Inc. (IGI). For a detailed description of the model currently used by IGI to project MFP, as well as a description of how the MFP adjustment was calculated for FY 2012, we refer readers to section IV.K.3 of this preamble. We proposed that if more recent data became subsequently available (for example, a more recent estimate of the market basket and MFP adjustment), we would use such data, if appropriate, to determine the FY 2012 market basket update and MFP adjustment in the final rule. The current estimate of the MFP adjustment for FY 2012 based on IGI’s second quarter 2011 forecast is 1.0 percent. Consistent with the statute, we reduce the FY 2012 market basket update of the LTCH PPS standard Federal rate using this same FY 2012 MFP adjustment. To determine the market basket update for LTCHs for FY 2012, as reduced by the MFP adjustment, consistent with the approach under the IPPS for FY 2012 (discussed in section IV.K.3. of this preamble), we subtracted the FY 2012 MFP percentage adjustment from the FY 2012 market basket update. Following application of the productivity adjustment, the adjusted market basket update (that is, the full market basket increase less the MFP adjustment) is then reduced by the ‘‘other adjustment’’ as required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. The market basket update for FY 2012, which reflects both the MFP adjustment and the ‘‘other adjustment’’ as required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, is described in section VII.E.2.e. of this preamble. e. Annual Market Basket Update for LTCHs for FY 2012 Consistent with our historical practice, we estimate the market basket VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 update based on IGI’s forecast using the most recent available data.For the proposed rule, based on IGI’s first quarter 2011 forecast, the FY 2012 market basket estimate for the LTCH PPS using the FY 2008-based RPL market basket was 2.8 percent. For this final rule, based on IGI’s second quarter 2011 forecast, the FY 2012 estimate of the FY 2008-based RPL market basket update is 2.9 percent. Section 1886(m)(3)(A)(i) of the Act specifies that, for FY 2012 (and subsequent years), any annual update to the standard Federal rate shall be reduced by the productivity adjustment (referred to as ‘‘the MFP adjustment’’) described in section 1886(b)(3)(B)(xi)(II) of the Act. Furthermore, section 1886(m)(3)(A)(ii) of the 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 section 1886(m)(4) of the Act. Specifically, section 1886(m)(4)(C) of the Act requires a 0.1 percentage point reduction to the annual update to the LTCH PPS standard Federal rate for FY 2012. In accordance with section 1886(m)(3)(A)(i) of the Act, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26006), we proposed to reduce the FY 2012 full market basket estimate of 2.8 percent (based on the first quarter 2011 forecast of the FY 2008-based RPL market basket) by the proposed FY 2012 MFP adjustment (that is, the 10-year moving average of MFP for the period ending FY 2012, as described in section VII.E.2.d of the preamble of the proposed rule) of 1.2 percent (based on IGI’s first quarter 2011 forecast). Following application of the proposed productivity adjustment, the proposed adjusted market basket update of 1.6 percent (2.8 percent minus 1.2 percentage points) was then reduced by 0.1 percentage point, as required by sections 1886(m)(3)(A)(ii) and 1886(m)(4)(C) of the Act. Accordingly, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26007), we proposed an annual market basket update under the LTCH PPS for FY 2012 of 1.5 percent (that is, the most recent estimate of the proposed LTCH PPS market basket update of 2.8 percent less the proposed MFP adjustment of 1.2 percentage points less the 0.1 percentage point required under section 1886(m)(4)(C) of the Act. In that same proposed rule, we proposed to revise § 412.523(c)(3) of the regulations by adding a new paragraph (viii), which would specify that the standard Federal rate for FY 2012 is the standard Federal rate for the previous long-term care PO 00000 Frm 00297 Fmt 4701 Sfmt 4700 51771 hospital prospective payment system fiscal year updated by 1.5 percent. Again, consistent with our historical practice of using the most recent available data, we proposed that if more recent data became available when we developed the final rule, we would use such data, if appropriate, in determining the final market basket update under the LTCH PPS for FY 2012. Therefore, in this final rule, consistent with our proposal, we are establishing an annual market basket update under the LTCH PPS for FY 2012 of 1.8 percent (that is, the most recent estimate of the LTCH PPS market basket update of 2.9 percent less the MFP adjustment of 1.0 percentage point less the 0.1 percentage point required under section 1886(m)(4)(C) of the Act). This is based on IGI’s second quarter 2011 forecast. Consistent with our proposal, we are revising § 412.523(c)(3) by adding a new paragraph (viii), which specifies that the standard Federal rate for FY 2012 is the standard Federal rate for the previous long-term care hospital prospective payment system fiscal year updated by 1.8 percent. 3. Budget Neutrality Adjustment for the Changes to the Area Wage Level Adjustment As described in section V.B. of the Addendum to this final rule, when the LTCH PPS was implemented, 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 laborrelated 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. Historically, in general, the LTCH PPS wage index and labor-related share are updated annually based on the latest available data. However, there are currently no statutory or regulatory requirements that state that any updates or adjustments to the LTCH PPS area wage level adjustment (that is, the wage index or the labor-related share) be budget neutral, such that estimated aggregate LTCH PPS payments would be neither greater than nor less than estimated aggregate LTCH PPS payments without such changes to the area wage level adjustment. As we discussed in the August 30, 2002 LTCH PPS final rule (67 FR 56015), when we implemented the E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51772 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations LTCH PPS, we established a 5-year transition to the full area wage level adjustment. The area wage level 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 full LTCH PPS wage index values are used to make payments under the LTCH PPS. As discussed in section VII.D. of this preamble, we are finalizing our proposal to revise and rebase the market basket used under the LTCH PPS for FY 2012. We also are finalizing our proposal to update the labor-related share for FY 2012 based on this market basket. Concurrent with those proposals, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26007), we took the opportunity to revisit our approach for the annual update of the area wage level adjustment. We discussed that, in order to mitigate estimated yearly fluctuations in estimated aggregate LTCH PPS payments, as have been suggested in the past, we have given further consideration to the issue of establishing a budget neutrality requirement for any changes to the area wage level adjustment. Therefore, under the broad authority conferred upon the Secretary under section 123 of the BBRA, as amended by section 307(b) of the BIPA, to develop the LTCH PPS, we proposed under § 412.525(c) that, beginning with the adjustment for area wage levels for FY 2012, any changes to the wage index values or labor-related share would be made in a budget neutral manner such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without such changes to the area wage level adjustment. Under this proposal, we proposed to determine an area wage level adjustment budget neutrality factor that would be applied to the standard Federal rate to ensure that any changes to the area wage level adjustment would be budget neutral such that any changes to the wage index values or labor-related share would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. We also proposed the steps (described below) we would follow to determine an area wage level adjustment budget neutrality factor that would be applied to the standard Federal rate that would ensure that the any update to the wage index values and to the labor-related share would be adopted in a budget neutral manner. Under this proposal, we proposed to VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 revise the existing regulations at § 412.523(d) to add a new paragraph (4) to specify that, beginning in FY 2012, we adjust the standard Federal rate by a factor that accounts for the estimated effect of any adjustments or updates to the area wage level adjustment under § 412.525(c)(1) on estimated aggregate LTCH PPS payments. We also proposed to revise existing § 412.525(c) to reflect our current policy of updating the laborrelated share annually. (76 FR 26007) Comment: A few commenters opposed the proposed budget neutrality requirement for changes to the LTCH PPS area wage adjustment for FY 2012. The commenters believed that CMS had not provided adequate justification for why such an adjustment is needed now when CMS has not contemplated one in past years, and requested that CMS provide data to justify this change in policy. Response: We do not agree with the commenters that we did not provide adequate justification for why we are revisiting our approach for the annual update of the area wage level adjustment at this time. As we stated in the FY 2102 IPPS/LTCH PPS proposed rule (76 FR 26007), we believe establishing a budget neutrality requirement for any changes to the area wage level adjustment would mitigate estimated yearly fluctuations in estimated aggregate LTCH PPS payments. Each labor market area’s wage index value is calculated as the ratio of that labor market area’s average hourly wage to the national average hourly wage. The annual update to the wage index is only intended to reflect changes in hospital labor costs in each geographic labor market area relative to the change in the national average hospital labor costs for all areas. Because the area wage adjustment is a measure of relative hospital labor costs, it is not intended to result in changes (increases or decreases) in aggregate payments. LTCH payments rates are updated annually to account for changes in hospital labor costs by the price growth reflected in the labor-related categories of the applicable LTCH PPS market basket update. For example, if nationally each hospital’s labor costs increased by 5 percent, although labor costs have increased, the area wage index (which is the ratio of the area’s average hourly wage to the national average hourly wage) would not change because the relative measure of the area’s labor costs as compared to the national average labor costs has not changed. In fact, aggregate payments will increase based on changes to the labor portion of the market basket. Moreover, a budget neutrality PO 00000 Frm 00298 Fmt 4701 Sfmt 4700 requirement for any changes to the area wage level adjustment is consistent with our policy under other hospital PPSs, such as the IPPS, IRF PPS, and IPF PPS. We note that none of the commenters provided policy or technical justifications for not budget neutralizing for changes to the LTCH PPS area wage adjustment. Therefore, for the reasons stated above, in this final rule, we are adopting our proposal to establish a budget neutrality requirement for any changes to the area wage adjustment without modification, beginning in FY 2012. We did not receive any public comments on our proposed methodology (steps) for determining an area wage level adjustment budget neutrality factor that would be applied to the standard Federal rate. We also did not receive any public comments on our proposed changes to the regulations at § 412.523(d) and § 412.525(c) under our area wage level adjustment budget neutrality proposal. Therefore, as discussed below, we are adopting these proposals in this final rule. In this final rule, under the broad authority conferred upon the Secretary under section 123 of the BBRA, as amended by section 307(b) of the BIPA, to develop the LTCH PPS, as we proposed, under § 412.525(c)(2), we are establishing a budget neutrality requirement for any changes to the adjustment for area wage levels, beginning in FY 2012. Under this policy, any changes to the wage index values or labor-related share will be made in a budget neutral manner such that estimated aggregate LTCH PPS payments are unaffected, that is, will be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without such changes to the area wage level adjustment. We also are determining under this budget neutrality requirement, as we proposed, an area wage level adjustment budget neutrality factor that will be applied to the standard Federal rate to ensure that any changes to the area wage level adjustment are budget neutral, such that any changes to the wage index values or labor-related share will not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. As we proposed, we are revising the existing regulations at § 412.523(d) to add a new paragraph (4), which specifies that, beginning in FY 2012, we adjust the standard Federal rate by a factor that accounts for the estimated effect of any adjustments or updates to the area wage level adjustment under § 412.525(c)(1) on estimated aggregate LTCH PPS E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations payments. In addition, as we proposed, we are revising existing § 412.525(c) to reflect our current policy of updating the labor-related share annually. For this final rule, consistent with our proposal, we used the following methodology to determine an area wage level adjustment budget neutrality factor that is applied to the standard Federal rate under at § 412.523(d)(4) for FY 2012 to account for the estimated effect of any adjustments or updates to the area wage level adjustment under § 412.525(c)(1) on estimated aggregate LTCH PPS payments: • Step 1—We simulate estimated aggregate LTCH PPS payments using the FY 2011 wage index values as established in Tables 12A and 12B of the Addendum to the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50627 through 50646) and the FY 2011 laborrelated share of 75.271 percent as established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50391 and 50445). • Step 2—We simulate estimated aggregate LTCH PPS payments using the FY 2012 wage index values as shown in Tables 12A and 12B of the Addendum to this final rule and the FY 2012 laborrelated share of 70.199 percent (based on the latest available data as discussed in section VII.D.3.f. of this preamble). • Step 3—We calculate the ratio of these estimated total LTCH PPS payments by dividing the estimated total LTCH PPS payments using the FY 2011 area wage level adjustments (calculated in Step 1) by the estimated total LTCH PPS payments using the proposed FY 2012 area wage level adjustments (calculated in Step 2) to determine the area wage level adjustment budget neutrality factor. • Step 4—We then apply the FY 2012 area wage level adjustment budget neutrality factor from Step 3 to determine the FY 2012 LTCH PPS standard Federal rate after the application of the FY 2012 annual update (discussed in section V.A.2. of the Addendum to this final rule). As explained above, this factor is applied to the FY 2012 standard Federal rate to ensure that the FY 2012 update to the wage index values and to the laborrelated share (discussed in section V.B. of the Addendum to this final rule) are adopted in a budget neutral manner. For this final rule, using the steps in the methodology described above, we determined a FY 2012 area wage level adjustment budget neutrality factor of 0.99775. Accordingly, in section V.A.2. of the Addendum to this final rule, to determine the FY 2012 LTCH PPS standard Federal rate, we applied an area wage level adjustment budget neutrality factor of 0.99775, in VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 accordance with § 412.523(d)(4). Accordingly, the FY 2012 LTCH PPS standard Federal rate shown in Table 1E of the Addendum to this final rule reflects this adjustment. 4. Greater Than 25-Day Average Length of Stay Requirement for LTCHs Section 1886(d)(1)(B) of the Act lists hospitals that are excluded from the IPPS. Section 1886(d)(1)(B)(iv) of the Act specifies the exclusion from the IPPS for ‘‘a hospital which has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days.’’ The average length of stay requirement was established as the sole prerequisite for a hospital seeking to be excluded from the IPPS under this provider category. Section 114(a) of the MMSEA of 2007 amended section 1861 of the Act by adding a new subsection (ccc), which further defined LTCHs. Thus, a hospital’s classification as an LTCH has depended, in large part, upon whether an acute care hospital met the greater than 25 days average length of stay requirement. Once the hospital was classified as such under this criterion, the ability for the hospital to continue its exclusion from the IPPS and be paid as an LTCH depended, in part, upon its continuing to meet that criterion. The regulations at 42 CFR 412.23(e)(1) and (e)(2) set forth the requirements a hospital must meet in order to be excluded from the IPPS and be paid as an LTCH. Specifically, § 412.23(e)(1) requires that a hospital must have a provider agreement under 42 CFR Part 489 to participate as a Medicare hospital, and § 412.23(e)(2) provides that a hospital must meet the LTCH average length of stay of greater than 25 days policy. The methodology for calculating the average length of stay is specified at § 412.23(e)(3). A detailed explanation of the procedural features of the average length of stay policy was included in the FY 2003 LTCH PPS final rule, which implemented the LTCH PPS (67 FR 55970 through 55974)). In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26008), we proposed to clarify two existing CMS policies related to the greater than 25 days average length of stay requirement policy: (1) The determination of the average length of stay for a hospital seeking exclusion under the IPPS to be paid as an LTCH or an existing LTCH undergoes a change of ownership; and (2) the inclusion of Medicare Advantage days in calculating the average length of stay. PO 00000 Frm 00299 Fmt 4701 Sfmt 4700 51773 a. Determination of the Average Length of Stay When There Is a Change of Ownership Under § 412.23(e)(3)(iv) of the regulations, we implemented a policy regarding the application of the average length of stay methodology, where a hospital (that is either seeking LTCH status, or is an existing LTCH) has undergone a change of ownership. Specifically, in the event of a change of ownership, the regulation provides: ‘‘If a hospital has undergone a change of ownership (as described in § 489.18 of this chapter) at the start of a cost reporting period or at any time within the period of at least 5 months of the preceding 6-month period, the hospital may be excluded from the prospective payment system as a long-term care hospital for a cost reporting period if, for the period of at least 5 months of the 6 months immediately preceding the start of the period (including time before the change of ownership), the hospital has the required average length of stay, continuously operated as a hospital, and continuously participated as a hospital in Medicare.’’ Section 412.23(e)(3)(iv) institutes a procedure by which the average length of stay of a hospital seeking LTCH status or an existing LTCH is evaluated by its fiscal intermediary or MAC to determine whether or not the facility that is being sold meets the requirements for LTCH status. Because the sale of the facility, in effect, ends the seller’s cost reporting period (§ 413.24(f)(1)), and triggers the beginning of the purchaser’s first cost reporting period, the period of time that is evaluated is the ‘‘at least 5 months of the 6 months immediately preceding the period (including time before the change of ownership’’ to determine the average length of stay that will result in the hospital that meets the requirements for LTCH status. If the average length of stay data indicates that, for this period of time, the hospital met the required average length of stay of greater than 25 days, then the new owner’s hospital will achieve IPPS exclusion and LTCH status. On the other hand, if the data indicate that the hospital does not meet the required average length of stay, the hospital will instead be paid under the IPPS under its new ownership. We understand that there has been some confusion in the provider community regarding the specific applicability of this regulation to a change of ownership of an existing LTCH. Accordingly, in the proposed rule, we proposed to clarify this policy in regulation text by revising § 412.23(e)(3)(iv) to specifically address the circumstance of a hospital that has not as yet been classified as an LTCH E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51774 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations and wishes to be classified as an LTCH based on data from the hospital’s discharges occurring both before and after the change of ownership. Moreover, in an effort to provide greater clarity, we also proposed to establish a separate provision in the regulations (proposed paragraph (e)(3)(v) under § 412.23) to directly address LTCH status where there is a change of ownership of an existing LTCH. The sale of an existing LTCH, which triggers the beginning of a new cost reporting period under the new owner (413.24(f)(1)), is a situation where we believe it is appropriate to review whether the hospital that is being sold has been functioning as an LTCH, that is, has been treating patients for on average length of stay of greater than 25 days, before allowing the new owner to continue to be paid for services provided at the hospital under the LTCH PPS. Therefore, we proposed that where there has been a change of ownership of an existing LTCH, the hospital will continue to be excluded from the inpatient prospective payment system as a long-term care hospital for the cost reporting period beginning with the change of ownership only if for the period of at least 5 months of the 6 months immediately preceding the change of ownership, the hospital meets the required average length of stay. We note that, conversely, under this proposed policy, if the hospital fails to meet the required average length of stay criterion, after this evaluation, and if it is an acute-care hospital, it will be paid instead under the IPPS effective with the day of the change of ownership, that is, the start of the new owner’s cost reporting period. Accordingly, we proposed to clarify our existing policy as described above by (1) revising existing § 412.23(e)(3)(iv), to specifically address LTCH status in instances where a hospital is seeking IPPS exclusion and payment under the LTCH PPS but a change of ownership has occurred, and (2) proposed to establish a new § 412.23(e)(3)(v) to specifically address the issue of LTCH status for existing LTCHs undergoing a change of ownership. Comment: One commenter did not understand the clarification that CMS proposed, noting that the only distinction between § 412.23(e)(3)(iv) and § 412.23(e)(3)(v) appeared to be a ‘‘new [30 day] notice requirement * * * applicable only to existing LTCHs, but not to newly qualifying LTCHs.’’ This commenter also requested that CMS resolve an ‘‘inconsistency’’ between the preamble language and the regulation text language regarding the definition of VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 the 5 months of the 6 months that is to be evaluated. The commenter indicated that the preamble states that the period in question is ‘‘* * * at least 5 months of the 6 months immediately preceding the change of ownership * * * ’’ but the regulation text at § 412.23(e)(3)(v) states ‘‘* * * at least 5 months of the 6 months immediately preceding the start of the hospital’s next cost reporting period before the change of ownership * * *.’’ Another commenter expressed concern about CMS recognizing the distinction between the sale of an LTCH that would trigger the average length of stay review specified in proposed § 412.23(e)(3)(v) and the transfer of an LTCH to a related party that could take place during a corporate reorganization of an integrated hospital system. Response: In response to the commenter’s lack of clarity about the similarities between existing § 412.23(e)(iv) and proposed §§ 412.23(e)(3)(iv) and (e)(3)(v), we emphasize that we have proposed to clarify existing policy, not to change it. The two ‘‘new’’ regulations that we proposed are limited to LTCH changes of ownership under either of two specific situations: A hospital that is sold prior to achieving LTCH status (§ 412.23(e)(3)(iv)); and the sale of an existing LTCH (§ 412.23(e)(3)(v)). Our goal in proposing this clarification of our existing LTCH change of ownership policy at § 412.23(e)(iv) was to divide the regulation that was causing confusion among the provider community because it formerly covered change of ownership in both situations—LTCHs under development and existing LTCHs—into two separate regulations. The new regulation at § 412.23(e)(3)(v) cited the already existing requirement for a 30-day notice to CMS for a hospital undergoing a ‘‘change of ownership or control, including changes in authorized official(s) or delegated official(s) * * *’’ at § 424.516(e). We included the 30-day notice because we have been informed by our regional offices that, in the past, compliance with this 30-day notice requirement by existing LTCHs that are being sold has been somewhat inconsistent and may not have been understood to apply to LTCHs. Because of ongoing communication between the hospital wishing to qualify as a LTCH and CMS when a hospital is applying to CMS for LTCH status, CMS regional office staff do not report this to be a problem during the LTCH qualifying period. However, the notice requirement at § 424.516(e) applies to all providers and suppliers enrolled in the Medicare program. PO 00000 Frm 00300 Fmt 4701 Sfmt 4700 We appreciate the commenter bringing to our attention the lack of conformity between the preamble language and the regulation text at § 412.23(e)(3)(v) regarding the 5 months of the 6 months period in question for the evaluation of the average length of stay calculation. Because, as we note in the preamble, a change of ownership triggers the start of a new cost reporting period, in order to clarify this regulation text, in this final rule, we are revising the regulation text to state ‘‘* * * at least 5 months of the 6 months immediately preceding the change of ownership. In response to the commenter who requested that we specify that a corporate reorganization of an integrated hospital system that includes an LTCH would not trigger an evaluation of the LTCH’s average length of stay, we note that if a business transaction relating to an LTCH meets the definition of a change of ownership under § 489.18, it would be governed by the applicable regulation at § 412.23(e)(3). After consideration of the public comments we received, we are finalizing our clarification of our change of ownership policy for LTCHs at §§ 412.23(e)(3)(iv) and (e)(3)(v). b. Inclusion of Medicare Advantage (MA) Days in the Average Length of Stay Calculation With the passage of the Balanced Budget Act of 1997, Medicare beneficiaries were given the option to receive their Medicare benefits through private health insurance plans instead of through the original Medicare plan (Parts A and B). These programs were known as Medicare+Choice or Part C plans (Section 1851 through 1859 of the Act, implemented in 42 CFR Part 422). Pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the compensation and business practices changed for insurers that offer these plans, and ‘‘Medicare+Choice’’ plans became known as Medicare Advantage (MA) plans.) When CMS implemented the LTCH PPS beginning in FY 2003, we revised the then-existing policy for calculating the average length of stay for LTCHs described at then § 412.23(e)(2)(i). Under the TEFRA payment system, the average length of stay was determined by ‘‘* * * dividing the number of total inpatient days * * * by the total discharges for the hospital’s most recent complete cost reporting period * * *’’ However, beginning with FY 2003, under the newly implemented LTCH PPS, the calculation was based on ‘‘dividing the total number of covered E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations and noncovered days of stay of Medicare inpatients * * * by the total Medicare discharges for the hospital’s most recent complete cost reporting period’’ (§ 412.23(e)(3)(i)). The rationale for this change, as noted in the preamble to the FY 2003 LTCH PPS final rule, is that ‘‘LTCHs exist as a provider type in order to treat Medicare patients requiring complex long-term hospitallevel care. We believe that a hospital’s right to qualify for payments under the prospective payment system for LTCHs should result from the actual provision of clinically appropriate care to Medicare LTCH patients * * *’’ (67 FR 55971). Although the policy since the start of the LTCH PPS has been for all LTCH patients being paid for by Medicare to be included in the average length of stay calculation, until recently, we were unable to include data for Medicare Advantage (MA) patients in our calculations because our database did not capture discharge data on claims paid by an MA plan. (In contrast, patients who still had private insurance as their primary health coverage and for whom Medicare was a secondary payer, were included in the calculations because the portion of their claims covered by Medicare was paid by Part A and was therefore included in our database.) On July 20, 2007, we issued Change Request 5647 that required the submission by hospitals (IPPS, IRFs, and LTCHs) of ‘‘information only’’ (not for payment) bills for their MA patients to their fiscal intermediaries or MACs beginning with FY 2007. The stated goal of capturing these MA data was that the data were needed for disproportionate share payments (DSH) under the IPPS, low-income patient (LIP) payments under the IRF PPS, and for short-stay outlier (SSO) payments under the LTCH PPS. An additional one-time notification, Change Request 6821, issued on June 7, 2010, reiterated the requirements of Change Request 5647 for the reporting of MA days for DHS and LIP data and also noted ‘‘[i]n addition, this data is used for other purposes such as determining LTCH short stay outlier payments and evaluating the greater than 25 days length of stay requirement of Medicare patients for LTCHs.’’ Although the inclusion of MA days in the average length of stay calculation has been CMS’ policy under the LTCH PPS because, at the outset of the LTCH PPS, we specified that the average length of stay calculation was based on ‘‘all covered’’ and on ‘‘all covered days of stay of Medicare patients’’ (§ 412.23(e)(2)), we acknowledge that, in VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 practice, MA days were not included due to limitations in our ability to capture the data. We have been informed by some members of the provider community that it was not their understanding that MA data should be included in determining a LTCH’s average length of stay, and that, in some cases, the inclusion of these data could substantially lower their average length of stay, thus threatening their status as LTCHs. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26008 and 26009), we proposed to clarify our existing policy at 42 CFR 412.23(e)(3) on the calculation of the average length of stay to specify that all data on all Medicare inpatient days, including MA days, shall be included in the average length of stay calculation. Comment: A number of commenters urged CMS to establish a specific effective date for this policy, and one of these commenters requested that we confirm that the existing ‘‘* * * at least 5 months of the preceding 6 month’’ cure period would still be in effect for an LTCH failing to meet the average length of stay requirement as a result of the inclusion of MA days in the average length of stay calculation. Several commenters challenged CMS’ assertion that the inclusion of MA days was ‘‘clarification of existing policy’’ and argued that the inclusion of MA days in the average length of stay calculation was a new policy. Therefore, the commenters urged CMS to study the impact on LTCHs of instituting this ‘‘new policy,’’ while instructing Medicare contractors not to include MA days in the average length of stay calculation until this evaluation was completed and then, to subject the policy to notice and comment rulemaking. Several commenters expressed concern because contracts currently in place between some LTCHs and managed care organizations limit the LTCH lengths of stay of beneficiaries who are enrolled in those plans. The inclusion of those MA days, the commenters feared, would result in a decrease in some LTCHs’ average length of stay, and thereby threatens their LTCH status. One commenter opposed the inclusion of MA days in the average length of stay calculation for LTCHs, arguing that the managed care payment model is radically different than the feefor-service model and, therefore, is incompatible with the ‘‘average of greater than 25 day’’ length of stay requirement for LTCHs. Because the inclusion of such days in the average length of stay calculation could negatively impact LTCH status, the commenter warned that inclusion of PO 00000 Frm 00301 Fmt 4701 Sfmt 4700 51775 MA days could lead to some LTCHs denying care to beneficiaries who have elected to enroll in MA plans. Response: While we understand the commenters’ concern about the impact of counting MA days in an LTCHs’ average length of stay calculation, we reassert that the inclusion of such days has been contemplated since the establishment of the LTCH PPS (67 FR 55970 through 55975) and delayed only by previous technical limitations on CMS’ ability to obtain the MA data. Our regulations at § 412.23(e)(2)(i) specify that the average length of stay calculation is based on ‘‘* * * all covered and noncovered days of stay of Medicare patients * * *. ’’ ‘‘All covered and noncovered days of stay of Medicare patients’’ includes the days of stay of Medicare managed care patients. Additionally, as noted in this preamble, on July 20, 2007, in Change Request 5647, we required the submission of data on MA patients by hospitals (IPPS hospitals, IRFs, and LTCHs), and on June 7, 2010, in Change Request 6821, we reiterated this requirement while also specifying that the data would be used for ‘‘* * * evaluating the greater than 25 days length of stay requirement of Medicare patients for LTCHs.’’ The inclusion of MA days in the LTCH average length of stay requirement is not a new policy, but rather the implementation of a long-stated step that is now technically feasible for the Medicare program. We had determined that it was appropriate to discuss this issue as a ‘‘clarification’’ in the FY 2012 IPPS/LTCH PPS proposed rule, and solicited public comments because it was brought to our attention that the above noted change requests had resulted in some confusion in the provider community. We also understand the concern that several of the commenters have about the impact that the shorter lengths of stay negotiated by managed care organizations could have on retaining LTCH status. Therefore, we are finalizing the clarification of our policy with an effective date for the inclusion of MA days in the average length of stay calculation for LTCH cost reporting periods beginning on or after January 1, 2012. We also are instructing our contractors not to remove LTCH designation from any LTCH based on the fact that it fails to meet the average length of stay requirement solely due to the inclusion of MA days in its average length of stay calculation until cost reporting periods beginning on or after January 1, 2012. In response to the commenter’s concern, we also are confirming our longstanding policy E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51776 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations regarding the evaluation of data from ‘‘* * * at least 5 months of the preceding 6 month’’ ‘‘cure’’ period for an LTCH that fails to meet the average length of stay requirement. Therefore, even after January 1, 2012, a hospital will be able to maintain its LTCH status if it has a greater than 25-day average length of stay (including MA days) for at least 5 months of the 6 months prior to the beginning of the cost reporting period when it would lose its LTCH status if it did not meet the average length of stay requirement. In response to the commenter who objected to the inclusion of data from beneficiaries who elected to enroll in managed care plans rather than traditional Medicare in the average length of stay calculation, arguing that the MA model is not compatible with the average length of stay policy, which is based on a fee-for-service payment model, we note that Medicare Advantage (as Medicare + Choice) is a statutory creation (section 1851 through 1859 of the Act) for payment for services provided to Medicare patients. The exclusion of LTCHs from the IPPS as acute care hospitals for patients with ‘‘* * *an average inpatient length of stay (as determined by the Secretary) of greater than 25 days (section 1886(d)(1)(B)(iv) of the Act) is a description of a hospital treating long length of stay patients. By regulation, we have prescribed that the test is based on Medicare patients rather than all of the hospital’s patients. Congressional action could mandate a determination that MA patients should not be included. However, thus far, although Congress has addressed the LTCH PPS, it has not addressed the exclusion of MA days from the greater than 25-day average length of stay determination. Finally, our experience in meeting with LTCH trade associations, the medical and administrative leadership of LTCHs, and our site visits to numerous LTCHs, as well as our recent data on LTCH inpatient censuses, do not confirm the commenter’s warnings about reduced MA patient access to LTCHs that will result should MA patient days be included in the average length of stay calculation. After consideration of the public comments we received, we are finalizing our proposed clarification but with an effective date for inclusion of MA days in the average length of stay calculation for LTCH cost reporting periods beginning on or after January 1, 2012. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 F. Application of LTCH Moratorium on the Increase in Beds at Section 114(d)(1)(B) of Public Law 110–173 (MMSEA) to LTCHs and LTCH Satellite Facilities Established or Classified as Such Under Section 114(d)(2) of Public Law 110–173 Under section 114(d) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110–173), Congress established one moratorium on the establishment or classification of new LTCHs and LTCH satellite facilities and a second moratorium on the increase in the number of LTCH beds in ‘‘existing hospitals and satellite facilities.’’ This section 114(d) provision was amended by section 4302(b) of the American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111–5) and implemented in interim final rules issued in the Federal Register on May 22, 2008, and August 27, 2009 (73 FR 29704 through 29707 and 74 FR 43990 through 43992, respectively), and finalized in the FY 2010 and FY 2011 IPPS/LTCH PPS final rules (74 FR 43985 through 43990 and 75 FR 50397 through 50399, respectively). With the passage of the Affordable Care Act on March 23, 2010, these moratoria were extended under sections 3016 and 10312 for an additional 2 years, through December 29, 2012. The extension was implemented in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50400). Specific exceptions to each moratorium are included in the statute and permit both the continued establishment or classification of an LTCH or LTCH satellite facility and an increase in LTCH beds at a statutorily defined ‘‘existing’’ hospital or satellite facility, respectively. Under section 114(d)(2) of the MMSEA, as of December 29, 2007, the preclusion on the establishment or classification of a new LTCH or LTCH satellite facility as of December 29, 2007, would not apply if the hospital met one of the following three exceptions: • The LTCH began its qualifying period for payment as a LTCH under 42 CFR 412.23(e) on or before the date of enactment of the MMSEA (section 114(d)(2)(A)); • The LTCH has a binding written agreement with an outside, unrelated party for the actual construction, renovation, lease, or demolition for a LTCH and had expended before December 29, 2007, at least 10 percent of the estimated cost of the project or, if less, $2.5 million (section 114(d)(2)(B)); or • The LTCH has obtained an approved certificate of need (CON) in a State where one is required on or before PO 00000 Frm 00302 Fmt 4701 Sfmt 4700 December 29, 2007 (section 114(d)(2)(C)). Section 114(d)(3) of the MMSEA, as originally enacted, provided an exception to the moratorium on an increase in beds at an existing LTCH or LTCH satellite facility, if an existing LTCH or satellite facility is located in a State where there is only one other LTCH; and the LTCH or satellite facility requests an increase in beds following the closure or decrease in the number of beds of another LTCH in the State. Section 4302(b) of the ARRA amended this MMSEA provision to specify an additional exception to the moratorium on the increase in bed number 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 the CON was issued on or after April 1, 2005, and before December 29, 2007. In implementing these two moratorium provisions, we required that each hospital or entity submit details of its individual circumstance for evaluation by CMS regional offices and contractors in order to determine whether a specific statutory exception was applicable to the particular situation (74 FR 43985 through 43990). We note that, based upon these exceptions (73 FR 29707), CMS records indicate that, as of January 1, 2011, 50 new LTCHs and 8 new LTCH satellites have been established or classified after December 29, 2007, the date MMSEA was enacted. (Data on additional beds developed in existing LTCHs and LTCH satellite facilities under the CON exception provided by section 4302(b) of the ARRA are maintained by States.) Sections 3106 and 10312 of the Affordable Care Act provided a 2-year extension of both moratoria initially established by section 114(d)(1) of the MMSEA (which provided for an original 3-year application), indicating that Congress continues to believe that it is appropriate to continue to stem the increase in the number of LTCHs and LTCH satellite facilities and LTCH beds. As noted above, section 114(d)(1)(B) of the MMSEA established a moratorium on the increase of LTCH beds in existing LTCHs or satellite facilities. Section 114(d)(4) of the MMSEA defines ‘‘an existing hospital or satellite facility’’ as a hospital or satellite facility that received payment under the LTCH PPS as of December 29, 2007, the date of enactment of the MMSEA. By definition, LTCHs or satellite facilities that were established or classified as such under an exception at section 114(d)(2) to the moratorium under section 114(d)(1)(A) first received payments under the LTCH PPS after E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations December 29, 2007, and therefore, would not fall under the definition of ‘‘an existing hospital or satellite facility’’ to whom the moratorium on the increase in bed numbers at section 114(d)(1)(B) applies. However, we do not believe that it was Congress’ intent to allow this subset of hospitals and satellite facilities established or classified after the enactment of MMSEA unlimited bed growth and expansion. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26010), we noted that continued Congressional concern regarding the increase in the number of LTCHs and satellite facilities and LTCH beds is indicated in the 2year extension of the moratorium provided by sections 3106 and 10312 of the Affordable Care Act. Section 123 of the Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA of 1999) (Pub. L. 106–113), as amended by section 307 (b) of the Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106–554), confers upon the Secretary discretion in creating the LTCH PPS as the payment system for LTCHs beginning in FY 2003. Furthermore, the Secretary has authority, under the general rulemaking authority of sections 1102(a) and 1871(a) of the Act, to establish rules and regulations as necessary to administer the Medicare program and for the efficient administration of the Medicare program. Consistent with these authorities, therefore, in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26010), we proposed that, effective October 1, 2011, the moratorium established under section 114(d)(1)(B) of the MMSEA, and implemented at 42 CFR 412.23(e)(7) be applied to those LTCHs and LTCH satellite facilities established or classified as such pursuant to the exceptions at section 114(d)(2) to the moratorium specified under section 114(d)(1)(B) of the MMSEA, as implemented at 42 CFR 412.23(e)(6). Specifically, we proposed to limit the number of beds in these facilities to the number of beds that were certified by Medicare at the LTCH or satellite facility when it was first paid under the LTCH PPS. We proposed to amend § 412.23 by adding a new paragraph (e)(8) to specify this policy. We believe that this policy captures the essence of the original statutory moratoria and the subsequent extension of the moratoria for an additional 2 years—which was to limit growth in the number of LTCHs and LTCH satellite VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 facilities and LTCH beds payable under Medicare—while recognizing the inherent fairness in allowing those projects already underway that represented substantial investment, planning, and State commitment to be completed. Comment: One commenter supported CMS’ position on extending the moratorium on increasing the number of beds in ‘‘existing’’ LTCHs to those LTCHs and satellites established pursuant to exceptions provided in the statute. Response: We appreciate the commenter’s support for the proposed policy. Comment: Three commenters urged CMS not to implement the extension of the moratorium to ‘‘new’’ LTCHs and LTCH satellites. These commenters noted that had Congress wished to extend the original moratorium on an increase in the number of beds in existing LTCHs and LTCH satellites that was first promulgated in MMSEA to LTCHs and LTCH satellites that had been established under one of the exceptions to the moratorium on the establishment of new LTCHs and LTCH satellites, Congress could have utilized either the ARRA or the Affordable Care Act for such a purpose. One of the commenters cited a longstanding Supreme Court decision (Chevron U.S.A. v. NRDC, 467 U.S. 837, 842–843 (1984)) which established the standard for determining the validity of regulatory provisions. The commenter stated that under Chevron’s twopronged test: (1) if it is determined that Congress has directly spoken to ‘‘* * * the precise question at issue’’ then ‘‘* * * we must give effect to the unambiguously expressed intent of Congress;’’ but (2) if the statute is ‘‘silent or ambiguous with respect to the specific issue’’ it need only be asked whether the regulation is ‘‘based on a permissible construction of the statute.’’ This commenter argued that because the MMSEA specified that the moratorium on bed increases applied to ‘‘existing LTCHs and satellites,’’ the extension of the moratorium by CMS to LTCHs and LTCH satellites that did not exist at the time of the legislation but were established under an exception, would be a violation of the Chevron Court decision. Response: We do not agree that the failure to include a specific extension of the moratorium on bed increases to those LTCHs and LTCH satellite facilities originally excepted from the moratoria established under the MMSEA (new LTCHs and LTCH satellite facilities) in either the ARRA or the Affordable Care Act indicates that PO 00000 Frm 00303 Fmt 4701 Sfmt 4700 51777 Congress intended to allow such LTCHs and LTCH satellite facilities unlimited authority to expand their bed numbers while restricting the growth of ‘‘existing’’ LTCHs. We also disagree with the commenters’ arguments that the statute precisely answers the question at issue. We believe the discussion above describing our understanding of Congress’ intent as well as the law governing the authorities for creating the LTCH PPS and the authorities to establish rules and regulations as necessary to administer the Medicare program and for the efficient administration of the Medicare program provide an appropriate and sufficient basis for the agency to finalize this policy as proposed. Moreover, we emphasize that, in finalizing this policy as proposed, we do not believe that it was Congress’ intent to allow the one subgroup of LTCHs and LTCH satellite facilities established after the enactment of the MMSEA unlimited bed growth and expansion, particularly while extending both of the moratoria applicable to ‘‘existing’’ LTCHs and LTCH satellite facilities an additional 2 years in sections 3106 and 10312 of the Affordable Care Act. Comment: One commenter requested that, if CMS finalizes the proposed policy, ‘‘a specific exclusion’’ be applied to any ‘‘new’’ LTCH that had increased its bed capacity beyond the number of beds that were certified by Medicare when it was first paid under the LTCH PPS. Response: We agree with the commenter that it is possible that some ‘‘new’’ LTCHs have already increased their bed numbers beyond those that existed when they were first certified by Medicare and paid under the LTCH PPS. In consideration of this possibility, we are revising the proposed regulation text at § 412.23(e)(8) that we are adopting as final to indicate that the moratorium on increases in bed numbers for LTCHs and LTCH satellites that were established under one of the exceptions to the moratorium applies to the number of beds at the LTCH as of October 1, 2011. After consideration of the public comments we received, in this final rule, we are adopting our proposed addition of new § 412.23(e)(8) with the modification noted above. That is, we are specifying that effective October 1, 2011 and ending December 28, 2012, the moratorium established under section 114(d)(1)(B) of the MMSEA, and implemented at 42 CFR 412.23(e)(7) will be applied to those LTCHs and LTCH satellite facilities established or classified as such pursuant to the exceptions at section 114(d)(2) to the E:\FR\FM\18AUR2.SGM 18AUR2 51778 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations moratorium specified under section 114(d)(1)(B) of the MMSEA, as implemented at § 412.23(e)(6). Specifically, we are modifying the language to limit the number of beds in these facilities to the number of beds to those ‘‘that were certified by Medicare at the LTCH or satellite facility as of October 1, 2011’’ to replace the proposed language of the ‘‘initial number of Medicare certified beds established under paragraph (e)(6)(ii). * * *’’. VIII. 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 2011 ‘‘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 recommendations for the IPPS for FY 2012 are addressed in Appendix B to this final rule. 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. IX. Other Required Information mstockstill on DSK4VPTVN1PROD with RULES2 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 2012 IPPS/LTCH PPS proposed rule (76 FR 26010 through 26012). Commenters interested in discussing any data used in constructing this proposed rule should contact Nisha Bhat at (410) 786–5320. B. Collection of Information Requirements 1. Statutory Requirement for Solicitation of Comments Under the Paperwork Reduction Act of 1995, we are required to provide 60day notice in the Federal Register and VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 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. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 226012 through 26015), we solicited public comment on each of these issues 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. 2. ICRs for Add-On Payments for New Services and Technologies Section II.I.1. of the preamble of the proposed rule and 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 2012 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 PO 00000 Frm 00304 Fmt 4701 Sfmt 4700 collection does not impact 10 or more entities in a 12-month period. In FYs 2008, 2009, 2010, 2011, and 2012, we received 1, 4, 5, 3, and 3 applications, respectively. We did not receive any public comments regarding these information collections. 3. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program The Hospital Inpatient Quality Reporting (IQR) Program (formerly referred to as the Reporting Hospital Quality Data for Annual Payment (RHQDAPU) Program) was originally established to implement section 501(b) of the MMA, Public Law 108–173. This Program expanded our voluntary Hospital Quality Initiative. The Hospital IQR Program originally consisted of a ‘‘starter set’’ of 10 quality measures. The collection of information associated with the original starter set of quality measures was previously approved under OMB control number 0938–0918. We are currently seeking reinstatement of the information collection and will publish the required 60-day and 30-day notices in the Federal Register to solicit public comments. We added additional quality measures to the Hospital IQR Program and submitted the information collection request to OMB for approval. This expansion of the Hospital IQR measures was part of our implementation of section 5001(a) of the DRA. New section 1886(b)(3)(B)(viii)(III) of the Act, added by section 5001(a) of the DRA, requires that the Secretary expand the ‘‘starter set’’ of 10 quality measures that were established by the Secretary as of November 1, 2003, to include measures ‘‘that the Secretary determines to be appropriate for the measurement of the quality of care furnished by hospitals in inpatient settings.’’ The burden associated with these reporting requirements was previously approved under OMB control number 0938–1022. We are currently seeking reinstatement of the information collection and will publish the required 60-day and 30-day notices in the Federal Register to solicit public comments.is currently approved under OMB control number 0938–1022. For the FY 2014 and FY 2015 payment updates, we intend to seek OMB approval for a revised information collection request using the same OMB control number (0938–1022). In the revised request, we will add five measures that we adopted in the FY 2011 IPPS/LTCH PPS final rule (four chart-abstracted measures and an HAI measure (Surgical Site Infection (SSI)) to be collected via NSHN for the FY 2014 payment determination. In addition, we E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations are adding one HAI measure (CAUTI) also to be collected via NHSN, one structural measure and one claimsbased measure that we are adopting in this final rule for the FY 2014 payment determination. We estimate that the changes to our FY 2014 payment determination measure set will increase the collection burden on hospitals by approximately 3,260,175 hours per year. Because the currently approved CDC information collection request for the NHSN (OCN: 0920–0666) does not include all of the respondents associated with the Hospital IQR Program, we intend to request a separate OMB control number for the measures to be collected via the NHSN. With respect to the four new chartabstracted measures for the FY 2014 payment determination, hospitals will be required to submit data on patients who receive inpatient acute care hospital services. Specifically, with respect to the two EDT measures and two Global Immunization measures, hospitals will need to collect information on patients who receive inpatient acute care hospital services regarding EDT, as well as influenza and pneumonia vaccination information for all inpatients for which hospitals currently collect only for patients admitted for pneumonia. We estimate that hospitals will incur an additional 3,500,000 burden hours resulting from the addition of these four measures for the FY 2014 payment determination. We estimate that hospitals will submit approximately 3,500,000 cases annually for these 4 measures, and the information needed to calculate these measures requires an average of 1 hour to abstract from medical records for each case. The HAI measure (Surgical Site Infection (SSI)) that we added in the FY 2011 IPPS/LTCH PPS final rule for the FY 2014 payment determination and the HAI measure that we are adding in this final rule for the FY 2014 payment determination (CAUTI) are structured to keep additional burden to a minimum because they are to be collected via NHSN. More than 4,000 hospitals in 29 States are already using NHSN to comply with State-mandated reporting. Although these HAI measures will add burden for hospitals, we believe that the additional burden will be lessened because hospitals will already be using NHSN to report the CLABSI measure for the FY 2013 payment determination. In addition, as mentioned above, not all hospitals will experience any additional burden because many hospitals already submit data to this system either voluntarily or as part of mandatory State reporting requirements for HAIs. The VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 burden associated with these requirements is the time and effort associated with collecting and submitting the additional data. We estimate that hospitals will need about 500,000 additional hours to report Surgical Site Infection (SSI), and CAUTI event data and denominator information into the system. The structural measure we are adding for the FY 2014 payment determination will require hospitals to indicate whether they are participating in a systematic qualified clinical database for registry for General Surgery and, if so, to identify the registry. We estimate that 3,500 hospitals will spend about 5 minutes each to answer this question each year, resulting in an estimated total increase of 175 hours in terms of the total burden to hospitals each year. We also are adding one new claimsbased measure for the FY 2014 payment determination. We do not believe that this claims-based measure will create any additional burden for hospitals because it will be collected and calculated by CMS based on the Medicare FFS claims the hospitals have already submitted to CMS. We believe that the overall burden on hospitals will be reduced to some extent by the policy we finalized in the FY 2011 IPPS/LTCH PPS final rule to retire two measures (PN–2 and PN–7) beginning with the FY 2014 payment determination. Burden will be further reduced because, in this final rule, beginning with the FY 2014 payment determination, we are retiring or suspending data collection for eight additional measures (AMI–1 Aspirin at Arrival, AMI–3 ACE/ARB, AMI–4 Smoking Cessation, AMI–5 Beta-Blocker at Discharge, HF–4 Smoking Cessation, PN–4 Smoking Cessation, PN–5c Antibiotic within 6 Hours of Arrival and SCIP Inf-6 Appropriate Hair Removal), beginning with discharges occurring on January 1, 2012. We estimate that the retirement or suspension of these measures will reduce the burden to hospitals by a total of 740,000 hours including reductions of 170,000 hours for abstracting AMI measures, 220,000 hours for abstracting PN measures, 50,000 hours for abstracting HF measures, and 300,000 hours for abstracting SCIP measures. We also are adding two new chartabstracted measure sets to the Hospital IQR Program for FY 2015: Stroke (eight measures) and Venous Thromboembolism (VTE) (six measures). Both measure sets are of great importance to the Medicare population, with stroke affecting about 795,000 people each year (American Stroke Association). Both stroke and PO 00000 Frm 00305 Fmt 4701 Sfmt 4700 51779 VTE measures are currently collected by The Joint Commission for accreditation and certification purposes. Both measure sets use complementary data elements to our current SCIP, VTE, and AMI measure sets, thus reducing the chart-abstraction burden. The burden associated with these measure sets is the time and effort associated with collecting and submitting the additional data. We estimate that each chartabstracted measure set will require about 1 hour to abstract. We anticipate the number of subsection (d) hospitals participating in the Hospital IQR Program to be approximately 3,500. The number of charts to be abstracted by all participating hospitals is estimated to be 180,000 per year for the Stroke measure set, and 6,000,000 per year for the VTE measure set. In total, our addition of the Stroke and VTE measure sets is estimated to increase the burden to hospitals by 6,180,000 hours per year. We also are adding three new HAI measures to be collected via NHSN to the Hospital IQR Program for FY 2015: (1) Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia measure; (2) C. Difficile SIR measure; and (3) Healthcare Personnel Influenza vaccination measure. The information needed for these measures will be collected via NHSN, and, therefore, is structured to keep additional burden to a minimum because more than 4,000 hospitals in 29 States are already using NHSN to comply with State-mandated reporting. Although this will add burden to hospitals, the initial setup and acclimation to the NHSN system will have already occurred with the adoption of the CLABSI measure for the Hospital IQR Program for the FY 2013 payment determination. In addition, as mentioned above, not all hospitals will experience any additional burden since many hospitals already submit data to this system either voluntarily or as part of mandatory State reporting requirements for HAIs. The burden associated with this section is the time and effort associated with collecting and submitting the additional data. With respect to the new HAI measures for the FY 2015 payment determination, we estimate that an additional 1,500,000 burden hours per year (500,000 hours per measure) will be incurred by hospitals to report data on these measures. We estimate that our changes to the FY 2015 Hospital IQR Program measure set will increase the collection burden to hospitals by approximately 7,680,000 hours per year. We have stated our intention to explore mechanisms for data submission using electronic health E:\FR\FM\18AUR2.SGM 18AUR2 51780 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations records (EHRs) (73 FR 48614; 74 FR 43866, 43892; 75 FR 50189). 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 capturing, formatting, and transmitting the 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 Hospital IQR Program measure set with less cost and burden to hospitals. We believe that automatic collection and reporting of data through EHRs will greatly simplify and streamline reporting for various CMS quality reporting programs, and that at a future date, currently targeted to be FY 2015, hospitals will be able to switch solely to EHR-based reporting of data that are currently manually chartabstracted and submitted to CMS for the Hospital IQR Program. mstockstill on DSK4VPTVN1PROD with RULES2 4. ICRs for the Occupational Mix Adjustment to the FY 2012 Index (Hospital Wage Index Occupational Mix Survey) Section II.D. of the preamble of the proposed rule and this final rule discusses the occupational mix adjustment to the final FY 2012 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. 5. Hospital Applications for Geographic Reclassifications by the MGCRB Section III.I.3. of the preamble of the proposed rule and this final rule discusses revisions to the wage index based on hospital redesignations. As stated in that section, under section VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 1886(d)(10) of the Act, the MGCRB has the authority to accept short-term IPPS hospital applications requesting geographic reclassification for wage index or standardized payment amounts and to issue decisions on these requests by hospitals for geographic reclassification for purposes of payment under the IPPS. The burden associated with this application process is the time and effort necessary for an IPPS hospital to complete and submit an application for reclassification to the MGCRB. While this requirement is subject to the PRA, the associated burden is currently approved under OMB control number 0938–0573, with an expiration date of December 31, 2011. We did not receive any public comments on this information collection requirement. 6. ICRs for the Quality Reporting Program for LTCHs In section VII.C. of the preamble of the proposed rule and this final rule, we discuss three quality reporting measures for LTCHs for FY 2014: (1) Catheter Associated Urinary Tract Infections (CAUTI); (2) Central Line Associated Blood Stream Infection Event (CLABSI); and (3) Pressure Ulcers that are New or Have Worsened. As proposed, we will collect the HAI CLABSI and CAUTI quality measures through the use of the CDC/NHSN (https://www.cdc.gov/nhsn/). We will require that LTCH facilities report data on each patient in their facility who has been diagnosed with either a catheter associated urinary tract infection or a central line associated bloodstream infection. The NHSN is a secure, Internet-based surveillance system which is maintained and managed by CDC. Many LTCHs already submit data to the NHSN either voluntarily or as part of mandatory State reporting requirements for HAIs. There are currently 439 certified LTCHs and, according to CDC, 80 of these LTCHs already submit HAI data to NHSN. For these LTCHs, the burden of complying with the requirements of the quality reporting program will be reduced because these LTCHs are familiar with the NHSN submission process. We provide financial incentives to IPPS hospitals to report data regarding certain HAIs via NHSN as part of the Hospital IQR Program. We adopted the CLABSI quality measure under the Hospital IQR Program for the FY 2013 payment determination and are adopting the CAUTI measure for the FY 2014 payment determination. In addition, hospitals in 29 States are PO 00000 Frm 00306 Fmt 4701 Sfmt 4700 already using NHSN, and CDC supports more than 4,000 hospitals that are already using NHSN. Many LTCHs are integrated into or are part of large inpatient hospital systems. We believe that these hospital systems have gained the requisite knowledge and experience with the submission of data about HAIs via NHSN, under the Hospital IQR Program, State law, or voluntarily. Therefore, the transition to reporting HAIs via the NHSN for these LTCHs may be less burdensome. The burden associated with these quality measures is the time and effort associated with collecting and submitting the data concerning CAUTI and CLABSI to NHSN for LTCHs that are not currently reporting such data. During the 12-month period from April 2010 to March 2011, 58 LTCHs reported CLABSI for at least one month, and the same number reported CAUTI for at least one month. For LTCHs that already submit data regarding these HAIs to NHSN, there should be little, if any, additional burden. For LTCHs who submit data to NHSN for other HAIs, but not CAUTI and CLABSI data, there may be some burden. However, we believe that this burden will be significantly decreased because these LTCHs are already enrolled in the NHSN system and are already familiar with the NHSN data submission process. There are currently 435 LTCHs in the United States paid under the LTCH PPS. We estimate that each LTCH will submit approximately 12 NHSN submissions (6 CAUTI and 6 CLABSI) per month (144 per LTCH annually). This equates to a total of approximately 62,640 submissions of HAI data to NHSN from all LTCHs paid under the LTCH PPS per year. We estimate that each NHSN assessment will take approximately 25 minutes to complete. This time estimate consists of 10 minutes of clinical (for example, nursing time) needed to collect the clinical data and 15 minutes of clerical time necessary to enter the data into the NHSN data base. Based on this estimate, we expect each LTCH will expend 300 minutes (5 hours) per month and 60 hours per year reporting to NHSN. Therefore, the total estimated annual hourly burden to all LTCHs paid under the LTCH PPS for reporting to NHSN is 26,100 hours. The estimated cost per submission is estimated at $12.07. These costs are estimated using an hourly wage for a Registered Nurse of $41.59 and a Medical Billing Clerk/ Data Entry person of $20.57 (U.S. Bureau of Labor Statistics data). Therefore, we estimate that the annual cost per each LTCH provider will be $1,739 and the total yearly cost to all LTCHs paid under the LTCH PPS for the E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations submission of CAUTI and CLABSI data to NHSN would be $756,326.71 The aforementioned requirements are subject to the PRA and the associated burden hours will be accounted for in a revision to the information collection request currently approved as OCN 0920–0666. With respect to the pressure ulcer measure, we will post the specification for the pressure ulcer measure on our Web site along with the specific data elements necessary to be collected by no later than January 31, 2012. We expect that the specific data items needed are part of the Continuity Assessment Record & Evaluation (CARE) data item set. We developed the CARE as required by section 5008 of the Deficit Reduction Act of 2005. In 2011, CARE underwent revisions. The revised CARE data item set now consists of a compilation of items from a comprehensive CMS standardized item library. The revised Medicare CARE data item set is intended to be used to: (1) Standardize program information on Medicare beneficiaries’ acuity at discharge from acute hospitals, (2) document medical severity, functional status and other factors related to outcomes and resource utilization at admission, discharge, and interim times during post acute treatment, (3) understand the relationship between severity of illness, functional status, social support factors, and resource utilization; and (4) report quality measure data to CMS. Because the CMS CARE pressure ulcer data item set has not previously been introduced in the LTCH setting, there will be some initial burdens associated with the introduction of this data item set. These initial costs will mainly be incurred in the training of the facility staff. However, there should be little, if any, additional education required, in regards to the collection of the data, because pressure ulcer assessment should be a vital part of good patient care and daily in-house patient chart documentation. LTCHs participating in the LTCH Quality Reporting Program will be required to perform the CARE pressure ulcer assessment on each patient upon admission and again upon discharge. We believe that it is necessary to obtain admission and discharge pressure ulcer assessments on all patients admitted to LTCH facilities in order to obtain full and complete statistical data regarding the quality of care provided by the 71 Nursing Time—24 hours @ $41.59 per hour = $998.16; $998.16 × 435 LTCHs = $434,200. Admin Time—36 hours @ $20.57 per hour = $740.52; $740.52 × 435 LTCHs = $322,126. TOTAL = $434,200 + $322,126 = $756,326. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 facility to the patients receiving care in that facility. The delivery of high quality care in the LTCH setting is imperative. We believe that collecting quality data on all patients in the LTCH setting supports our mission to insure quality care for Medicare beneficiaries. Collecting data on all patients provides the most robust and accurate reflection of quality in the LTCH setting. Accurate representation of quality provided in LTCHs is best conveyed using data related to pressure ulcers on all LTCH patients, regardless of payer, using a subset of the CARE data item set. An admission assessment is necessary in order to assess for either the presence or absence of pressure ulcers upon admission. If pressure ulcers are detected upon admission, they must be properly assessed, staged and documented. Upon discharge, an assessment is needed to determine if any worsening of the pressure ulcers occurred during the LTCH stay. If no pressure ulcers had been noted on the admission assessment, then a discharge pressure ulcer assessment would be necessary in order to assess whether the patient had developed any new pressure ulcers during the LTCH stay. At the time of publication of this final rule, CMS has not completed development of the information collection instrument that LTCHs would have to submit to comply with the reporting requirements regarding the CARE pressure ulcer assessment. Because the CARE data item set is still undergoing development, we cannot assign a complete burden estimate at this time. Once the CARE data item set has been completed and finalized, we will publish the required 60-day and 30day Federal Register notices to solicit public comments on this data reporting method and to announce the submission of the information collection request to OMB for its review and approval. 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 476 Health care, Health professional, Health record, Peer Review Organization (PRO), Penalties, Privacy, Reporting and recordkeeping requirements. PO 00000 Frm 00307 Fmt 4701 Sfmt 4700 51781 For the reasons stated in the preamble of this final rule, the Centers for Medicare & Medicaid Services confirms the interim rule published March 14, 2011, at 76 FR 13515, is confirmed as final without change and 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 Public Law 106–113 (113 Stat. 1501A–332). 2. Section 412.23 is amended by— a. In paragraph (e)(3)(i), removing the cross-reference ‘‘paragraph (e)(3)(ii) through (e)(3)(iv) of this section’’ and adding in its place the cross-reference ‘‘paragraphs (e)(3)(ii) through (v) of this section’’. ■ b. Revising paragraph (e)(3)(iv). ■ c. Adding paragraph (e)(3)(v). ■ d. Adding paragraph (e)(8). The revision and additions read as follows: ■ ■ § 412.23 Excluded hospitals: Classifications. * * * * * (e) * * * (3) * * * (iv) If a hospital seeks exclusion from the inpatient prospective payment system as a long-term care hospital and a change of ownership (as described in § 489.18 of this chapter) occurs within the period of at least 5 months of the 6month period preceding its petition for long-term care hospital status, the hospital may be excluded from the inpatient prospective payment system as a long-term care hospital for the next cost reporting period if, for the period of at least 5 months of the 6 months immediately preceding the start of the cost reporting period for which the hospital is seeking exclusion from the inpatient prospective payment system as a long-term care hospital (including time before the change of ownership), the hospital has met the required average length of stay, has continuously operated as a hospital, and has continuously participated as a hospital in Medicare. (v) For periods beginning on or after October 1, 2011, a hospital that is excluded from the inpatient prospective payment system as a long-term care hospital that plans to undergo a change of ownership (as described in § 489.18 of this chapter) must notify its fiscal intermediary or MAC within 30 days of the effective date of such change of E:\FR\FM\18AUR2.SGM 18AUR2 51782 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations ownership, as specified in § 424.516(e) of this subchapter. The hospital will continue to be excluded from the inpatient prospective payment system as a long-term care hospital for the cost reporting period following the change of ownership only if, for the period of at least 5 months of the 6 months immediately preceding the change of ownership, the hospital meets the required average length of stay (calculated in accordance with paragraph (e)(3)(i) of this section). * * * * * (8) Application of LTCH moratorium on the increase in beds at section 114(d)(1)(B) of Public Law 110–173 to LTCHs and LTCH satellite facilities established or classified as such under section 114(d)(2) of Public Law 110–173. Effective for the period beginning October 1, 2011, and ending December 28, 2012, for long-term care hospitals and long-term care hospital satellite facilities established under paragraph (e)(6)(ii) of this section for the period beginning December 29, 2007, and ending September 30, 2011, the moratorium under paragraph (e)(7) of this section applies and the number of Medicare-certified beds must not be increased beyond the number of beds that were certified by Medicare at the long-term care hospital or the long-term care hospital satellite facility as of October 1, 2011. * * * * * ■ 3. Section 412.64 is amended by— ■ a. Adding paragraph (d)(1)(iv). ■ b. Revising paragraph (h)(4) introductory text. The addition and revision read as follows: § 412.64 Federal rates for inpatient operating costs for Federal fiscal year 2005 and subsequent fiscal years. mstockstill on DSK4VPTVN1PROD with RULES2 * * * * * (d) * * * (1) * * * (iv) For fiscal year 2012, the percentage increase in the market basket index less a multifactor productivity adjustment (as determined by CMS) and less 0.1 percentage point for prospective payment hospitals (as defined in § 413.40(a) of this subchapter) for hospitals in all areas. * * * * * (h) * * * (4) For discharges on or after October 1, 2004 and before September 30, 2013, CMS establishes a minimum wage index for each all-urban State, as defined in paragraph (h)(5) of this section. This minimum wage index value is computed using the following methodology: * * * * * VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 4. Section 412.105 is amended by revising paragraph (b)(4) to read as follows: ■ § 412.105 Special treatment: Hospitals that incur indirect costs for graduate medical education programs. * * * * * (b) * * * (4) Beds otherwise countable under this section used for outpatient observation services, skilled nursing swing-bed services, ancillary labor/ delivery services, or inpatient hospice services; * * * * * ■ 5. Section 412.106 is amended by revising paragraph (a)(1)(ii)(B) to read as follows: § 412.106 Special treatment: Hospitals that service a disproportionate share of low income patients. (a) * * * (1) * * * (ii) * * * (B) Beds otherwise countable under this section used for outpatient observation services, skilled nursing swing-bed services, or inpatient hospice services; * * * * * ■ 6. Section 412.140 is added to Subpart H to read as follows: § 412.140 Participation, data submission, and validation requirements under the Hospital Inpatient Quality Review (IQR) Program. (a) Participation in the Hospital IQR Program. In order to participate in the Hospital IQR Program, a section 1886(d) of the hospital must– (1) Register on QualityNet.org, before it begins to report data; (2) Identify and register a QualityNet Administrator as part of the registration process under paragraph (a)(1) of this section; and (3) Submit a completed Notice of Participation Form to CMS if the hospital is participating in the program for the first time, has previously withdrawn from the program and would like to participate again, or has received a new CMS Certification Number (CNN). (i) A hospital that would like to participate in the program for the first time (and to which paragraph (a)(3)(ii) of this section does not apply), or that previously withdrew from the program and would now like to participate again, must submit to CMS a completed Notice of Participation Form by December 31 of the fiscal year preceding the fiscal year in which it wishes to participate. (ii) A hospital that has received a new CCN and would like to participate in the program must submit a completed PO 00000 Frm 00308 Fmt 4701 Sfmt 4700 Notice of Participation Form to CMS no later than 180 days from the date identified as the open date on the approved CMS Quality Improvement Evaluation System (QIES). (b) Withdrawal from the Hospital IQR Program. CMS will accept Hospital IQR Program withdrawal forms from hospitals on or before August 15 of the fiscal year preceding the fiscal year for which a Hospital IQR payment determination will be made. (c) Submission and validation of Hospital IQR Program data. (1) General rule. Except as provided in paragraph (c)(2) of this section, subsection (d) hospitals that participate in the Hospital IQR Program must submit to CMS data on measures selected under section 1886(b)(3)(B)(viii) of the Act in a form and manner, and at a time, specified by CMS. A hospital must begin submitting data on the first day of the quarter following the date that the hospital submits a completed Notice of Participation form under paragraph (a)(3) of this section. (2) Exception. Upon request by a hospital, CMS may grant an extension or waiver of one or more data submission deadlines in the event of extraordinary circumstances beyond the control of the hospital. Specific requirements for submission of a request for an extension or waiver are available onQualityNet.org. (d) Validation of Hospital IQR Program data. CMS may validate one or more measures selected under section 1886(b)(3)(B)(viii) of the Act by reviewing patient charts submitted by selected participating hospitals. (1) Upon written request by CMS or its contractor, a hospital must submit to CMS a sample of patient charts that the hospital used for purposes of data submission under the program. The specific sample that a hospital must submit will be identified in the written request. A hospital must submit the patient charts to CMS or its contractor within 30 days of the date identified on the written request. (2) A hospital meets the validation requirement with respect to a fiscal year if it achieves a 75-percent score, as determined by CMS. (e) Reconsiderations and appeals of Hospital IQR Program decisions. (1) A hospital may request reconsideration of a decision by CMS that the hospital has not met the requirements of the Hospital IQR Program for a particular fiscal year. Except as provided in paragraph (c)(2) of this section, a hospital must submit a reconsideration request to CMS no later than 30 days from the date identified on the Hospital Inpatient Quality Reporting Program Annual E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Payment Update Notification Letter provided to the hospital. (2) A reconsideration request must contain the following information: (i) The hospital’s CMS Certification Number (CCN); (ii) The name of the hospital; (iii) Contact information for the hospital’s chief executive officer and QualityNet system administrator, including each individual’s name, email address, telephone number, and physical mailing address; (iv) A summary of the reason(s), as set forth in the Hospital Inpatient Quality Reporting Program Annual Payment Update Notification Letter, that CMS concluded the hospital did not meet the requirements of the Hospital IQR Program; (v) A detailed explanation of why the hospital believes that it complied with the requirements of the Hospital IQR Program for the applicable fiscal year; (vi) Any evidence that supports the hospital’s reconsideration request, including copies of patient charts, emails and other documents; and (vii) If the hospital has requested reconsideration on the basis that CMS concluded it did not meet the validation requirement set forth in paragraph (d) of this section, the reconsideration request must contain the following additional information: (A) A copy of each patient chart that the hospital timely submitted to CMS or its contractor in response to a request made under paragraph (d)(1) of this section; and (B) A detailed explanation identifying which data the hospital believes was improperly validated by CMS and why the hospital believes that such data are correct. (3) A hospital that is dissatisfied with a decision made by CMS on its reconsideration request may file an appeal with the Provider Reimbursement Review Board under Part 405, Subpart R of this chapter. ■ 7. Section 412.211 is amended by adding paragraph (c)(4) to read as follows: § 412.211 Puerto Rico rates for Federal fiscal year 2004 and subsequent fiscal years. mstockstill on DSK4VPTVN1PROD with RULES2 * * * * * (c) * * * (4) For fiscal year 2012 and subsequent fiscal years, the applicable percentage increase specified in § 412.64(d). * * * * * ■ 8. Section 412.230 is amended by adding paragraph (d)(5) to read as follows: VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 § 412.230 Criteria for an individual hospital seeking redesignation to another rural area or an urban area. * * * * * (d) * * * (5) Single hospital MSA exception. The requirements of paragraph (d)(1)(iii) of this section do not apply if a hospital is the single hospital in its MSA that is paid under subpart D of this Part. ■ 9. Section 412.523 is amended by adding paragraphs (c)(3)(viii) and (d)(4) to read as follows: § 412.523 Methodology for calculating the Federal prospective payment rates. * * * * * (c) * * * (3) * * * (viii) For long-term care hospital prospective payment system fiscal year beginning October 1, 2011, and ending September 30, 2012. The standard Federal rate for the long-term care hospital prospective payment system beginning October 1, 2011, and ending September 30, 2012, is the standard Federal rate for the previous long-term care hospital prospective payment system fiscal year updated by 1.8 percent. The standard Federal rate is adjusted, as appropriate, as described in paragraph (d) of this section. * * * * * (d) * * * (4) Changes to the adjustment for area wage levels. Beginning in FY 2012, CMS adjusts the standard Federal rate by a factor that accounts for the estimated effect of any adjustments or updates to the area wage level adjustment under § 412.525(c)(1) on estimated aggregate LTCH PPS payments. * * * * * ■ 10. Section 412.525 is amended by revising paragraph (c) to read as follows: § 412.525 Adjustments to the Federal prospective payment. * * * * * (c) Adjustments for area wage levels. (1) The labor portion of a long-term care hospital’s Federal prospective payment is adjusted to account for geographical differences in the area wage levels using an appropriate wage index (established by CMS), which reflects the relative level of hospital wages and wage-related costs in the geographic area (that is, urban or rural area as determined in accordance with the definitions set forth in § 412.503) of the hospital compared to the national average level of hospital wages and wage-related costs. The appropriate wage index that is established by CMS is updated annually. The labor portion of a longterm care hospital’s Federal prospective PO 00000 Frm 00309 Fmt 4701 Sfmt 4700 51783 payment is established by CMS and is updated annually. (2) Beginning in FY 2012, any adjustments or updates to the area wage level adjustment under this paragraph (c) will be made in a budget neutral manner such that estimated aggregate LTCH PPS payments are not affected. * * * * * PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES 11. The authority citation for Part 413 continues to read as follows: ■ Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and (n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of Public Law 106–133 (113 Stat. 1501A–332). 12. Section 413.70 is amended by— a. Revising paragraph (b)(5)(i)(B). b. Adding paragraph (b)(5)(i)(C). The revision and addition read as follows: ■ ■ ■ § 413.70 Payment for services of a CAH. * * * * * (b) * * * (5) * * * (i) * * * (B) Effective for cost reporting periods beginning on or after January 1, 2004 and on or before September 30, 2011, 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. (C) Effective for cost reporting periods beginning on or after October 1, 2011, 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. If there is no provider or supplier of ambulance services located within a 35-mile drive of the CAH and there is an entity that is owned and operated by a CAH that is more than a 35-mile drive from the CAH, payment for ambulance services E:\FR\FM\18AUR2.SGM 18AUR2 51784 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations furnished by that entity is 101 percent of the reasonable costs of the entity in furnishing those services, but only if the entity is the closest provider or supplier of ambulance services to the CAH. * * * * * PART 476—UTILIZATION AND QUALITY CONTROL REVIEW 13. The authority citation for Part 476 continues to read as follows: ■ Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395(hh)). 14. Section 476.78 is amended by— a. In paragraph (a), removing the reference ‘‘§ 466.71’’ and adding in its place the reference ‘‘§ 476.71’’. ■ b. Revising paragraph (b). The revision reads as follows: ■ ■ § 476.78 Responsibilities of health care facilities. mstockstill on DSK4VPTVN1PROD with RULES2 * * * * * (b) Cooperation with QIOs. Health care providers that submit Medicare claims must cooperate in the assumption and conduct of QIO review. (1) Providers must allocate adequate space to the QIO for its conduct of review at the times the QIO is conducting review. (2) Providers must provide patient care data and other pertinent data to the QIO at the time the QIO is collecting review information that is required for the QIO to make its determinations. QIOs pay providers paid under the prospective payment system for the costs of photocopying records requested by the QIO in accordance with the payment rate determined under the methodology described in paragraph (c) of this section and for first class postage for mailing the records to the QIO. When the QIO does postadmission, preprocedure review, the provider must provide the necessary information before the procedure is performed, unless it must be performed on an emergency basis. Providers must— (i) Photocopy and deliver to the QIO all required information within 30 calendar days of a request; (ii) Deliver all required medical information to the QIO within 21 calendar days from the date of the request in those situations where a potential ‘‘serious reportable event’’ has been identified or where other circumstances as deemed by the QIO warrant earlier receipt of all required medical information. For purposes of this paragraph, a serious reportable event is defined as a preventable, serious, and unambiguous adverse event that should never occur. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 (3) Providers must inform Medicare beneficiaries at the time of admission, in writing, that the care for which Medicare payment is sought will be subject to QIO review and indicate the potential outcomes of that review. Furnishing this information to the patient does not constitute notice, under § 411.402(a) of this chapter, that can support a finding that the beneficiary knew the services were not covered. (4) When the provider has issued a written determination in accordance with § 412.42(c)(3) of this chapter that a beneficiary no longer requires inpatient hospital care, it must submit a copy of its determination to the QIO within 3 working days. (5) Providers must assure, in accordance with the provisions of their agreements with the QIO, that each case subject to preadmission review has been reviewed and approved by the QIO before admission to the hospital or a timely request has been made for QIO review. (6)(i) Providers must agree to accept financial liability for any admission subject to preadmission review that was not reviewed by the QIO and is subsequently determined to be inappropriate or not medically necessary. (ii) The provisions of paragraph (b)(6)(i) of this section do not apply if a provider, in accordance with its agreement with a QIO, makes a timely request for preadmission review and the QIO does not review the case timely. Cases of this type are subject to retrospective prepayment review under paragraph (b)(7) of this section. (7) Hospitals must agree that, if the hospital admits a case subject to preadmission review without certification, the case must receive retrospective prepayment review, according to the review priority established by the QIO. * * * * * (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 21, 2011. Donald M. Berwick, Administrator, Centers for Medicare & Medicaid Services. Dated: July 27, 2011. Kathleen Sebelius, Secretary. Note: The following Addendum and Appendixes will not appear in the Code of Federal Regulations. PO 00000 Frm 00310 Fmt 4701 Sfmt 4700 Addendum—Schedule of Standardized Amounts, Update Factors, and Rate-ofIncrease Percentages Effective With Cost Reporting Periods Beginning on or After October 1, 2011 I. Summary and Background 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 2012 for acute care hospitals. We also are setting forth the rateof-increase percentages for updating the target amounts for certain hospitals excluded from the IPPS for FY 2012. We note that, because certain hospitals excluded from the IPPS are paid on a reasonable cost basis subject to a rate-of-increase ceiling (and not by the IPPS), these hospitals are not affected by the figures for the standardized amounts, offsets, and budget neutrality factors. Therefore, in this finalrule, we are finalizing the rate-of-increase percentages for updating the target amounts for certain hospitals excluded from the IPPS that are effective for cost reporting periods beginning on or after October 1, 2011. In addition, we are setting forth a description of the methods and data we used to determine the standard Federal rate that will be applicable to Medicare LTCHs for FY 2012. 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 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) and 1886(b)(3)(D)(iv) E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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. Under section 5003(b) of Public Law 109– 171, if the change results in an increase to an MDH’s target amount, we must rebase an MDH’s hospital-specific rates based on its FY 2002 cost report. Section 5003(c) of Public Law 109–171 further required that MDHs be paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the updated 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 2012. 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 2012. 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 2012. 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 2012. The tables to which we refer in the preamble of this final rule are listed in section VI. of this Addendum and are available via the Internet. II. Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2012 The basic methodology for determining prospective payment rates for hospital inpatient operating costs for acute care hospitals for FY 2005 and subsequent fiscal years is set forth at § 412.64. The basic methodology for determining the prospective payment rates for hospital inpatient operating costs for hospitals located in Puerto Rico for FY 2005 and subsequent fiscal years is set forth at §§ 412.211 and 412.212. Below we discuss the factors used for determining the prospective payment rates for FY 2012. In summary, the standardized amounts set forth in Tables 1A, 1B, and 1C that are listed and published in section VI. of this Addendum (and available via the Internet) 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 hospital the highest payment, as provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act. • Updates of 1.9 percent for all areas (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent less an adjustment of 1.0 percentage point for multifactor productivity and less 0.1 percentage point), as required by section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. For hospitals that fail 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, pursuant to section 1886(b)(3)(B)(viii) of the Act, the update is ¥0.1 percent (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent, less 2.0 percentage points for failure to submit data under the Hospital IQR Program, less an adjustment of 1.0 percentage point for multifactor productivity, and less 0.1 percentage point). • An update of 1.9 percent to the Puerto Rico-specific standardized amount (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent less an adjustment of 1.0 percentage point for multifactor productivity and less 0.1 percentage point), in accordance with section 1886(d)(9)(C)(i) of the Act, as amended by section 401(c) of Public Law 108–173, which sets the update to the Puerto Rico-specific standardized amount equal to the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act. • 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 when we compute such budget neutrality, we assume that the provisions of section 1886(d)(3)(E)(ii) of the Act (requiring a 62 percent labor-related share in certain circumstances) had not been enacted. • 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 2011 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 extended the demonstration for an additional 5 years are budget neutral, as required under section 410A(c)(2) of Public Law 108–173. • An adjustment in light of the court’s decision in Cape Cod v. Sebelius, (630 F.3d 203 (DC Cir. 2011)). • An adjustment to remove the FY 2011 outlier offset and apply an offset for FY 2012, 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 sections 7(b)(1)(A) and 7(b)(1)(B) of Public Law 110–90 to adjust the standardized PO 00000 Frm 00311 Fmt 4701 Sfmt 4700 51785 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. 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 2011, for FY 2012, we are continuing to apply the rural floor budget neutrality adjustment to hospital wage indices rather than the standardized amount. 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 applying a uniform, national budget neutrality adjustment to the FY 2012 wage index for the rural floor. We note that, as discussed in section III.F.2. of the preamble of this final rule, we are extending the imputed floor for 2 more years. Therefore, we are continuing to apply the imputed floor budget neutrality adjustment to the wage indices. Thus, the imputed floor is reflected in the final FY 2012 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 timeto-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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51786 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 2012, we are continuing to use a labor-related share of 68.8 percent for discharges occurring on or after October 1, 2011, 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 2012, 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 that are listed and published in section VI. of the Addendum to this final rule and are available via Internet. 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 2012 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 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. As discussed in section IV.K.3. of the preamble of this final rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, we are reducing the FY 2012 applicable percentage increase (which is based on the second quarter 2011 forecast of the FY 2006based IPPS market basket) by the multifactor productivity (MFP) adjustment (the 10-year moving average of MFP for the period ending FY 2012) of 1.0 percent, which is calculated based on IHS Global Insight, Inc.’s (IGI’s) second quarter 2011 forecast. In addition, in accordance with section 1886(b)(3)(B)(i) of VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we are further updating the standardized amount for FY 2012 by the estimated market basket percentage increase less 0.1 percentage point for hospitals in all areas. Sections 1886(b)(3)(B)(xi) and (xii) of Act, as added and amended by sections 3401(a) and 10319(a) the Affordable Care Act, further state that these adjustments 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 routine, ancillary, and special care unit hospital inpatient services. Based on IGI’s 2011 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 2012 is 3.0 percent. Thus, for FY 2012, the update to the average standardized amount is 1.9 percent for hospitals in all areas (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent less an adjustment of 1.0 percentage point for multifactor productivity and less 0.1 percentage point). For hospitals that do not submit quality data pursuant to section 1886(b)(3)(B)(viii), the estimated update to the operating standardized amount is ¥0.1 percent (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent, less 2.0 percentage points for failure to submit data under the IQR program, less an adjustment of 1.0 percentage point for multifactor productivity, and less 0.1 percentage point) The standardized amounts in Tables 1A through 1C that are published in section VI. of this Addendum and available via the Internet reflect these differential amounts. Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act and states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the average standardized amount computed under subclause (I) for FY 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount is subject to the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, we are finalizing an applicable percentage increase to the Puerto Rico-specific standardized amount of 1.9 percent. Although the update factors for FY 2012 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 2012 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 PO 00000 Frm 00312 Fmt 4701 Sfmt 4700 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 2012 standardized amount to remove the effects of the FY 2011 geographic reclassifications and outlier payments before applying the FY 2012 updates. We then apply budget neutrality offsets for outliers and geographic reclassifications to the standardized amount based on FY 2012 payment policies. We do not remove the prior year’s budget neutrality adjustments for reclassification and recalibration of the DRG weights and for updated wage data because, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate payments after updates in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year’s adjustment, we would not satisfy these conditions. Budget neutrality is determined by comparing aggregate IPPS payments before and after making changes that are required to be budget neutral (for example, changes to DRG classifications, recalibration of the DRG relative weights, updates to the wage index, and different geographic reclassifications). We include outlier payments in the simulations because they may be affected by changes in these parameters. Consistent with our methodology established in the FY 2011 IPPS/LTCH final rule (75 FR 50422 through 50433), 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. Consistent with our methodology established in the FY 2011 IPPS/LTCH final rule (75 FR 50422–50423), 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 if the IME payment field was equal to the DRG payment field. The GHO Paid indicator with a value of ‘‘1’’ in 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)). For these Medicare Advantage claims from IPPS teaching hospitals, we computed a transfer-adjusted CMI by provider based on the FY 2011 MS– DRG GROUPER Version 28.0 assignment and relative weights. We also computed a transfer-adjusted CMI for these Medicare E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Advantage claims from IPPS teaching hospitals based on the FY 2012 MS–DRG GROUPER Version 29.0 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. Also, for this final rule, in order to ensure that we capture only fee for service claims, we are only including claims with a ‘‘Claim Type’’ of 60 (which is a field on the MedPAR file that indicates a claim is a fee for service claim). Additionally, consistent with our methodology established in the FY 2011 IPPS/LTCH final rule (75 FR 50422–50423), we examined the MedPAR and removed pharmacy charges for antihemophilic blood factor (which are paid separately under the IPPS) with an indicator of ‘‘3’’ for blood clotting with a revenue code of ‘‘0636’’from the covered charge field for the budget neutrality adjustments. We also removed organ acquisition charges from the covered charge field for the budget neutrality adjustments because organ acquisition is a pass-through payment not paid under the IPPS. Comment: One commenter noted that it is still likely that CMS is including charges for anti-hemophilic blood factor (which are paid separately under the IPPS) for the budget neutrality adjustments. The commenter explained that the majority of patients receiving blood clotting drugs have a pharmacy indicator of ‘‘5,’’ which denotes ‘‘general drugs and/or IV therapy and blood clotting drugs.’’ The commenter searched the MedPAR file and found 48,494 claims with a pharmacy indicator of ‘‘5’’ and 715 claims with a pharmacy indicator of ‘‘3.’’ Based on this analysis the commenter concluded that a majority of anti hemophilic blood factor claims contain an indicator of ‘‘5’’ rather than ‘‘3.’’ The commenter requested that CMS develop a method to identify and separate the charges for blood clothing drugs from other pharmacy charges for blood factor claims with an indicator of ‘‘5.’’ The commenter also stated that, alternatively, CMS could remove all pharmacy charges for code ‘‘5’’ claims that are projected to qualify as outliers under the FY 2012 proposed rule in situations where no outlier payments for FY 2010 were shown on the claims, but the patients would have qualified as outliers in FY 2010 based on the MedPAR claims for covered charges (which include charges for anti-hemophilic drugs). The commenter explained that anti-hemophilic blood factor are typically included in the covered charges but are excluded by the PRICER program from the charges used to pay the outlier. In many of these cases an outlier payment would have been made if the covered charges VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 were used but once the PRICER program excluded pharmacy charges for blood factor claims with an indicator of ‘‘5’’, no outlier payment was made. Response: We appreciate the commenter’s insights and are studying methods to uniquely identify anti-hemophilic blood factor charges in our MedPAR claims database with an indicator of ‘‘5.’’ It is possible that a change would be required to the MedPAR file, which could delay implementation, depending on the time needed to adopt the systems change. Additionally, we thank the commenter for providing an alternative methodology to identify anti-hemophilic blood factor charges with an indicator of ‘‘5.’’ However, we are not able to determine if the charges the commenter is excluding are only charges related to anti-hemophilic blood factor, and we are concerned that this method could exclude other charges that are not related to these items. Therefore, we prefer to develop a methodology that is more specific so that charges that are not related to antihemophilic blood factor are not excluded. 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 PO 00000 Frm 00313 Fmt 4701 Sfmt 4700 51787 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 2012, we are adjusting 100 percent of the wage index factor for occupational mix. We describe the occupational mix adjustment in section III.C. of the preamble of this final rule. For FY 2012, 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 2010 discharge data to simulate payments and compared aggregate payments using the FY 2011 labor-related share percentages, the FY 2011 relative weights, and the FY 2011 pre-reclassified wage data to aggregate payments using the FY 2011 labor-related share percentages, the FY 2012 relative weights, and the FY 2011 prereclassified wage data. Based on this comparison, we computed a budget neutrality adjustment factor equal to 0.997903. As discussed in section IV. of this Addendum, we also apply the DRG reclassification and recalibration budget neutrality factor of 0.997903 to the hospitalspecific rates that are effective for cost reporting periods beginning on or after October 1, 2011. 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 0.997903 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 2010 discharge data to simulate payments and compared aggregate payments using FY 2012 relative weights and FY 2011 pre-reclassified wage indices, and applied the FY 2011 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 2012 relative weights and the FY 2012 pre-reclassified wage indices, and applied the labor-related share for FY 2012 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 2011 to FY 2012. By applying this methodology, we determined a budget neutrality factor of E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51788 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 1.000558 for changes to the wage index. Finally, we multiplied the DRG reclassification and recalibration budget neutrality factor of 0.997903 (derived in the first step) by the budget neutrality factor of 1.000558 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 0.99846. 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 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 2012, we used FY 2010 discharge data to simulate payments and compared total IPPS payments with FY 2012 relative weights, FY 2012 labor-related share percentages, and FY 2012 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 2012 relative weights, FY 2012 labor-related share percentages, and FY 2012 wage data after such reclassifications. Based on these simulations, we calculated an adjustment factor of 0.991493 to ensure that the effects of these provisions are budget neutral, consistent with the statute. The FY 2012 budget neutrality adjustment factor is applied to the standardized amount after removing the effects of the FY 2011 budget neutrality adjustment factor. We note that the FY 2012 budget neutrality adjustment reflects FY 2012 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 the Affordable Care Act 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 As noted above, as discussed in section III.F.2. of the preamble of this final rule, we are extending the imputed floor for 2 more VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 years. We make an adjustment to the wage index to ensure that aggregate payments to hospitals 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 not affected. As discussed in section III.F. of the preamble of this final rule, consistent with section 3141 of the Affordable Care Act, the budget neutrality adjustment for the rural and imputed floors is a national adjustment to the wage index. As discussed in section III.F.2. of the preamble of this final rule, for the FY 2012 wage index, there is one new hospital in rural Puerto Rico when previously there were none. Therefore, for FY 2012, we are calculating a national rural Puerto Rico wage index (used to adjust the labor-related share of the national standardized amount for hospitals in Puerto Rico which receive 75 percent of the national standardized amount) and a rural Puerto Rico-specific wage index (which is used to adjust the labor-related share of the Puerto Rico-specific standardized amount for hospitals in Puerto Rico that receive 25 percent of the Puerto Rico-specific standardized amount). As the new rural Puerto Rico hospital has no established wage data, our calculation is based on the policy adopted in the FY 2008 IPPS final rule with comment period (72 FR 47323). A complete discussion on the computation of the rural Puerto Rico wage index can be found in section III.G. of the preamble of this final rule. In past fiscal years, when there was no rural Puerto Rico wage index, we applied the national rural floor budget neutrality wage index factor to the national wage indices used to adjust the labor-related share for the national standardized amount (including the national Puerto Rico wage indexes) but did not apply this factor to the Puerto Rico-specific wage indices. We did not apply the national rural floor budget neutrality wage index factor to the Puerto Rico-specific wage indices (nor did we compute a Puerto Rico-specific rural floor budget neutrality wage index factor) because there were no rural hospitals in Puerto Rico. As mentioned above, for FY 2012, there is now one rural Puerto Rico hospital and, therefore, it is necessary to compute and apply a Puerto Rico-specific rural floor budget neutrality wage index factor (in addition to the national factor). To calculate the national rural floor and imputed floor budget neutrality factor and Puerto Rico-specific rural floor budget neutrality adjustment factor, we used FY 2010 discharge data and FY 2012 postreclassified national and Puerto Rico-specific wage indices to simulate IPPS payments. First, we compared the national and Puerto Rico-specific simulated payments without the national rural floor and imputed floor and Puerto Rico-specific rural floor applied to national and Puerto Rico-specific simulated payments with the national rural floor and imputed floor and Puerto Ricospecific rural floor applied to determine the national rural budget neutrality adjustment factor of 0.991007 and the Puerto Ricospecific budget neutrality adjustment factor of 0.989417. The national adjustment was applied to the national wage indices to PO 00000 Frm 00314 Fmt 4701 Sfmt 4700 produce a national rural floor budget neutral wage index and the Puerto Rico-specific adjustment was then applied to the Puerto Rico-specific wage indices to produce a Puerto Rico-specific rural floor budget neutral wage index. d. Adjustment in Light of Court Decision in Cape Cod v. Sebelius In the FY 2012 IPPS/LTCH PPs proposed rule (76 FR 26022), we proposed a 1.1 percent adjustment to the standardized amount in recognition of the decision of Cape Cod v. Sebelius (630 F.3d 203 (DC Cir. 2011)) (hereafter referred to as ‘‘Cape Cod’’). However, we emphasized that remand proceedings in that case were not complete at that time and that the proposal reflected the timing of the development of the proposed rule and not a final decision as to how the remand will proceed. In Cape Cod, the plaintiff hospitals challenged the rural floor budget neutrality adjustments for FY 2007 and FY 2008. In its opinion, the DC Circuit Court found that section 4410 of the Balanced Budget Act of 1997 (BBA) Public Law 105–33, which authorized both the rural floor and rural floor budget neutrality, would not permit CMS to ignore prior year errors in calculating rural floor budget neutrality adjustments. The case was remanded to CMS for further proceedings consistent with the DC Circuit Court’s opinion. While Cape Cod involved only FYs 2007 and 2008, in the FY 2012 proposed rule we stated that the decision may have implications for FY 2012 payment rates, depending on the ultimate result of the remand proceedings. In light of that opinion and the timing of the rulemaking development process, we proposed to restore to the FY 2012 standardized amount the offset for the rural floor and imputed floor on the standardized amount over FY 1998 through 2006. We stated by making this proposal for FY 2012, all affected parties would have an opportunity to consider and comment on the proposed adjustment. Given that the court had remanded the case to the Secretary for FYs 2007 and 2008 and those remand proceedings were not yet completed at the time of issuance of the proposed rule, we indicated that the final rule might adopt a different approach, depending on public comments or developments in the remand proceedings. For purposes of the proposed rule, to assess the overall impact of applying the rural floor budget neutrality adjustment to the standardized amount for the years between FY 1998 and FY 2006, we remodeled the recalibration/wage index budget neutrality factor for the years at issue (for which data were available), excluding the effect of the rural floor adjustment. For example, to compute the revised recalibration/wage index budget neutrality factor for FY 2000, we compared the FY 1999 pre-reclassified wage data with no rural floor to FY 2000 pre-reclassified wage data with no rural floor. We then compared the revised factor to the wage/recalibration budget neutrality factor derived under the original modeling logic; that is, where the current year’s pre-reclassified wage data had a rural floor applied. The percent change in these E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations two factors was then calculated for each remodeled year. Remodeled years from FY 1998 to FY 2004 showed an approximate 0.1 percentage point increase between the factors for each year. This increase results in a total of 0.7 percentage point, which we proposed to return to the standardized amount in setting the FY 2012 IPPS rates. Beginning with FY 2005 through FY 2006, the number of States for which a floor wage index was available was extended via the imputed floor policy. With additional States receiving increases in payment due to the application of the imputed floor, we estimated the combined effects of the rural and imputed floor to be approximately 0.2 percentage point per year. This resulted in a total of 0.4 percentage point, which we proposed to return to the standardized amount in setting the FY 2012 IPPS rates. Therefore, to remove the effects of the rural floor from the standardized amount for FY 1998 through FY 2006, we proposed a one-time adjustment of 1.1 percentage points, which increases the standardized amount (0.7 percentage point plus 0.4 percentage point for a factor of 1.011). We noted that, in the FY 2008 IPPS final rule with comment period, we applied a one-time adjustment of 1.002214 to the FY 2008 standardized amount to address a single year transition (from FY 2007 to FY 2008) to a noncumulative system of the rural floor budget neutrality adjustment. The adjustment of 1.002214 to the FY 2008 standardized amount reflected the increase to the rates to remove the effects of the rural floor budget neutrality adjustment from FY 2007. Because this 1.002214 factor remains on the rate, we did not include an adjustment for FY 2007 in our calculation above. Comment: Commenters supported CMS’ proposal to provide a 1.1 percent adjustment in setting FY 2012 IPPS rates in light of the Court’s decision in Cape Cod Hospital vs. Sebelius. Several commenters requested that CMS provide complete explanations of the methodologies and data used in the calculation of the 1.1 and 0.9 percent adjustments to the standardized amount and hospital-specific rate, respectively, for FYs 1998 through 2006. The commenters suggested that such information would allow them to verify the adjustment. These commenters, however, did not propose an adjustment different from the 1.1 percent included in the FY 2012 proposed rule. Response: In response to these commenters’ comments, we are providing more detail on how we calculated the onetime adjustment for purposes of determining the FY 2012 IPPS rates. All of the data files discussed in this response are available to the public for download at https://www.cms.gov/ AcuteInpatientPPS/FFD/list.asp#TopOfPage. We first estimated the percentage by which the budget neutrality factors for wage and recalibration differed due to applying a cumulative budget rural floor for FYs 1998 through FY 2006. In calculating the original wage and recalibration budget neutrality factors, we simulated payments with the prior year’s pre-reclassified wage data that had no rural floor applied and prior year DRG assignments and weights. We then simulated payments with the current year’s VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 pre reclassified wage data with a rural floor applied and new DRG assignments and weights. These two simulations were compared against each other. The revised modeling approach, which was instituted and described in the FY 2008 IPPS final rule with comment period, calculates the wage and recalibration budget neutrality factor by simulating payments with the prior year pre reclassified wage data with no rural floor applied and prior year DRG assignments and weights and comparing those to simulated payments with the current year’s prereclassified wage data with no rural floor applied and new DRG assignments and weights. To estimate the percentage contribution of the rural floor to the wage and recalibration budget neutrality, we reconstructed payment data and budget neutrality models for the years involved in this case and then applied both the original and revised budget neutrality calculation methodology within the model. Some fiscal years (for example, FY 1998, FY 2001, and FY 2005) were more challenging to model than other fiscal years because multiple statutory changes in those years led to a more complicated payment structure. Each year, impact files are prepared to analyze the payment impact of policies and payment changes put forth in the IPPS final rules and contain the variables needed to simulate payments within each year. These impact files did not hold a wage index variable that reflected the ‘‘new’’ prereclassified wage data with no floor applied. From FY 2003 forward, we reconstructed pre reclassified wage index values with and without a floor applied using the wage and hour data files. For years prior to FY 2003, the wage and hour data files were not available so we set the wage index from the standardization file as the pre reclassified no floor wage index. Standardization files are prepared each year in conjunction with each final rule and contain pre-reclassified, prefloor wage index values for use in the process of recalibrating the DRG relative weights. Due to the time constraints with preparing the final rule each year, the wage index values contained in the standardization files are typically prepared as soon as there is wage data available and would reflect a prereclassified, pre-floor wage index value. Although they may not reflect all corrections and edits to the wage data that occurred in a particular year, the majority of wage index values contained in these files should match the correct pre-reclassified, pre-floor wage index values. Therefore, we believe these files are sufficient to approximate the payment effects of the rural floor policy. To establish a rural floor for each State, we used the wage index values for providers physically located in the rural area for their States. We then compared each provider’s pre-reclassified no floor wage index to the rural floor; if the pre-reclassified no floor wage index was lower, the provider’s wage index value was set equal to its State rural floor wage index. This established a prereclassified wage index with the rural floor. For FY 2003, FY 2004, and FY 2006, we reconstructed pre-reclassified wage index values with and without a rural floor using the wage data files. Because the wage data PO 00000 Frm 00315 Fmt 4701 Sfmt 4700 51789 files typically reflect the final wage data for the year and contain the most recent updates (minor wage data updates can occur throughout the year if there were mistakes in the data on the part of the provider and/or CMS), these files produced slightly different national average hourly wage values than the values published in the Federal Register for the IPPS final rules. Again, the majority of wage index values contained in these files should match the correct pre-reclassified, pre-floor wage index values. Therefore, we believe these files are sufficient to approximate the payment effects of the rural floor policy. We followed the same steps that we took for fiscal years prior to FY 2003 in building pre-reclassified with floor wage index values using the pre-floor wage index values for the rural providers to set the rural floors. Once the ‘‘with’’ and ‘‘without’’ rural floor wage index variables were constructed, they were merged into the impact files. Using payment simulation programs and rates from the historical budget neutrality libraries, we were able to estimate the effect of the rural floor policy for FY 1999, FY 2000, FY 2002, FY 2003, FY 2004, and FY 2006. We used these resulting estimates to assume a rural floor effect for the years we were unable to remodel in full because of the complexity of the payment structure in those years as noted above, that is, FY 1998, FY 2001, and FY 2005. For each separate fiscal year remodeled, we simulated payments with the prior year prereclassified wage data with no rural floor applied and prior year DRG assignments and weights. We compared these to simulated payments with the current year’s prereclassified wage data with no rural floor applied (constructed as described in the preceding paragraph) and new DRG assignments and weights. For example, for FY 2000, we compared the FY 1999 prereclassified wage data with no rural floor to FY 2000 pre-reclassified wage data with no rural floor. This produced a wage and recalibration budget neutrality factor that did not carry any rural floor effects. Using the same data set, we then repeated the original calculation methodology that retained prior years’ rural floor budget neutrality on the standardized amount; that is, we simulated payments with the prior year pre reclassified wage data with no floor applied and prior year DRG assignments and weights and then compared them to simulated payments with the new year’s pre reclassified wage data with floor applied (constructed as described in the preceding paragraph) and new DRG assignments and weights. We then calculated the percent change between the resulting budget neutrality factors to determine the percent contribution of the rural floor to the budget neutrality adjustment. The ‘‘original’’ methodology under which the rural floor was included in the wage and recalibration budget neutrality calculation was repeated on the data set(s) used for this estimate rather than using the actual wage and recalibration factors carried on the rates in order to limit the percent change between the two numbers solely to the application of the rural floor and to prevent introducing differences that would be due to data shifts between the original files and the ones used for this estimate. E:\FR\FM\18AUR2.SGM 18AUR2 51790 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Original budget neutrality method with rural floor included Remodeled budget neutrality FY FY FY FY FY FY 1999 2000 2002 2003 2004 2006 ....................................................................................... ....................................................................................... ....................................................................................... ....................................................................................... ....................................................................................... ....................................................................................... mstockstill on DSK4VPTVN1PROD with RULES2 We note that there is no difference between applying the cumulative and non-cumulative rural floor budget neutrality methodology in FY 1998 because there are no prior year payments to FY 1998 where the rural floor was applied. The first year in which there is an impact of the cumulative methodology is FY 1999, which carries forward the budget neutrality adjustment made in FY 1998. The only significant change in rural floor wage index policy (during the FYs 1999 through 2006) happened in FY 2005 when the imputed floor policy was established. The imputed floor policy provided a higher wage index to hospitals in States that have no rural areas and increases the impact of the rural floor on the budget neutrality calculation. In all the years we modeled through and including FY 2004, the percentage change in the wage and recalibration budget neutrality showed a 0.1 percent effect for the rural floor within each year. For FY 2006 and FY 2007, the estimate for the rural floor showed a 0.2 percent effect. Therefore, we assume that, similar to FY 2006, FY 2005 would also show a 0.2 percent effect because that was the year the imputed floor was first implemented. We further assume that any year prior to FY 2004 for which budget neutrality was not remodeled (that is, FY 1998 and FY 2001) would show a 0.1 percent effect due to the rural floor. Once the effects within each year were determined, we determined a cumulative effect of 1.1 percentage points. We note that, in the FY 2008 IPPS final rule with comment period, we applied a onetime adjustment of 1.002214 to the FY 2008 standardized amount to address a single year transition (from FY 2007 to FY 2008) to a noncumulative system of the rural floor budget neutrality adjustment. This adjustment of 1.002214 to the FY 2008 standardized amount reflected the increase to the rates to remove the effects of the rural floor budget neutrality adjustment from FY 2007. Because this 1.002214 factor remains on the rate, we do not include an adjustment for FY 2007 in the calculation described above. e. Case-Mix Budget Neutrality Adjustment (1) Adjustment to the FY 2012 IPPS Standardized Amount for the 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)(A)(vi) of the Act 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 0.999053 1.007418 0.996092 0.993478 1.003011 1.001375 with comment period (73 FR 47175 through 47186), we indicated that we believe the adoption of the MS–DRGs had the potential to lead to increases in aggregate payments without a corresponding increase in actual patient severity of illness due to the incentives for changes in documentation and coding. In that final rule, using the Secretary’s authority under section 1886(d)(3)(A)(vi) of the Act to maintain budget neutrality by adjusting the national standardized amounts to eliminate the effect of changes in documentation and coding that do not reflect real change in case-mix, we established prospective documentation and coding adjustments of ¥1.2 percent for FY 2008, ¥1.8 percent for FY 2009, and ¥1.8 percent for FY 2010 (for a total adjustment of ¥4.8 percent). On September 29, 2007, Public Law 110–90 was enacted. Section 7 of Public Law 110–90 included a provision that reduces the documentation and coding adjustment for the MS–DRG system that we adopted in the FY 2008 IPPS final rule with comment period to ¥0.6 percent for FY 2008 and ¥0.9 percent for FY 2009. To comply with the provision of section 7(a) of Public Law 110–90, in a final rule that appeared in the Federal Register on November 27, 2007 (72 FR 66886), we changed the IPPS documentation and coding adjustment for FY 2008 to ¥0.6 percent, and revised the FY 2008 national standardized amounts (as well as other payment factors and thresholds) accordingly, with these revisions being effective as of October 1, 2007. For FY 2009, section 7(a) of Public Law 110–90 required a documentation and coding adjustment of ¥0.9 percent instead of the ¥1.8 percent adjustment specified in the FY 2008 IPPS final rule with comment period. As required by statute, we applied a documentation and coding 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 rule and final rule (74 FR 24092 through 24101 and 43768 through 43772, respectively), we discussed our analysis of FY 2008 claims data and did not apply any additional documentation and coding adjustments to the average standardized amounts under section 1886(d) of the Act. We refer readers to these rules for a detailed description of our analysis, responses to comments, and final PO 00000 Frm 00316 Revised budget neutrality method excluding rural floor Fmt 4701 Sfmt 4700 0.999666 1.008316 0.997134 0.994443 1.003932 1.003103 Percent change between estimated budget neutrality factors (percent) 0.10 0.10 0.10 0.10 0.10 0.20 policy respectively. After analysis of the FY 2009 claims data for the FY 2011 IPPS/LTCH PPS final rule (75 FR 50057 through 50073), we 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 found a remaining documentation and coding effect of 3.9 percent. Therefore, we determined that 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. As we discussed in the FY 2011 IPPS/LTCH PPS final rule, we did not propose a prospective adjustment under section 7(b)(1)(A) of Public Law 110–90 for FY 2011 (75 FR 23868 through 23870). We note that, as a result, payments in FY 2011 (and in each future year until we implement the requisite adjustment) were 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 refer readers to the FY 2011 IPPS/ LTCH PPS final rule for a detailed description of our analysis, responses to comments, and final policy (75 FR 50057 through 50073). In the proposed rule, we stated it was imperative that CMS make a prospective adjustment amount in FY 2012 to prevent the continued accumulation of unrecoverable overpayments. After consideration of the public comments we received, and in keeping with our longstanding policy to mitigate, when possible, the effects of significant downward adjustments on hospitals to avoid what could be widespread, disruptive effects of such adjustments on hospitals, we are finalizing a prospective adjustment of ¥2.0 percent instead of the ¥3.15 percent prospective adjustment that was proposed. We refer the reader to section II.D. of the preamble of this final rule for more discussion. In addition, for a complete discussion on our proposed and final documentation and coding adjustment to the hospital-specific rates, we refer readers to section II.D.2.c.of this Addendum. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations (2) Adjustment to the FY 2012 IPPS Standardized Amount for the Recoupment or Repayment Adjustment for FY 2010 Authorized by Section 7(b)(1)(B) of Public Law 110–90 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 estimated that this 5.8 percentage point increase resulted in an increase in aggregate payments of approximately $6.9 billion. In the FY 2011 IPPS/LTCH PPS final rule, we determined that an aggregate adjustment of -5.8 percent in FYs 2011 and 2012, subject to actuarial adjustment to reflect accumulated interest, would be 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 increase in aggregate payments (including interest) in FYs 2008 and 2009. 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, as we specified in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50425), we made 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 refer readers to the FY 2011 IPPS/LTCH PPS final rule for a detailed description of our analysis, responses to comments, and final policy (75 FR 50057 through 50073). While we stated in the FY 2011 IPPS/LTCH PPS final rule the need to potentially adjust the remaining ¥2.9 percent estimate to account for accumulated interest, our actuaries have determined that there has been no significant interest accumulation and that no additional adjustment will be required. Therefore, in section II.D. of the preamble to this final rule, we finalized our proposal to complete the recoupment adjustment according to the timeframes set forth by section 7(b)(1)(B) of Public Law 110– 90 by implementing the remaining ¥2.9 percent adjustment, in addition to removing the effect of the ¥2.9 percent adjustment to the standardized amount finalized in FY 2011. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Because these adjustments will, in effect, balance out, there will be no year-to-year change in the standardized amount due to this recoupment adjustment. As this adjustment will complete the required recoupment for overpayments due to documentation and coding effects on discharges occurring in FYs 2008 and 2009, we anticipate removing the effect of this adjustment by adding 2.9 percent to the standardized amount in FY 2013. We continue to believe that this is a reasonable and fair approach that satisfies the requirements of the statute while substantially moderating the financial impact on hospitals. We refer the reader to section II.D. of the preamble to this final rule for more discussion. (3) Adjustment to the FY 2012 Puerto Rico Standardized Amount As discussed in section II.D.9. of the preamble of this final rule, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50071 through 50073), using the same methodology we applied to estimate documentation and coding changes under IPPS for non-Puerto Rico hospitals, our best estimate, based on the then most recently available data (FY 2009 claims paid through March 2010), was that for documentation and coding changes that occurred over FY 2008 and FY 2009, a cumulative adjustment of ¥2.6 percent was required to eliminate the full effect of the documentation and coding changes on future payments from the Puerto Rico-specific rate. In FY 2011, as finalized in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50071 through 50073), we applied an adjustment of ¥2.6 percent to the Puerto Rico-specific rate. Therefore, because the Puerto Rico-specific rate received a full prospective adjustment of ¥2.6 percent in FY 2011, in section II.D.9. of the preamble of this final rule, we finalized our proposal to make no further adjustment for FY 2012. For a complete discussion on our final policy, we refer readers to section II.D.9. of the preamble of this final rule. f. Rural Community Hospital Demonstration Program Adjustment As discussed in section IV.N. of the preamble to this final rule, section 410A of Public Law 108–173 originally required the Secretary to establish a demonstration that modifies 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.’’ Sections 3123 and 10313 of the Affordable Care Act extended the demonstration for an additional 5-year period, and allow up to 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 PO 00000 Frm 00317 Fmt 4701 Sfmt 4700 51791 period). In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50426), in order to achieve budget neutrality, we adjusted the national IPPS rates by an amount sufficient to account for the added costs of this demonstration as described in section IV.K. of that final rule. In other words, we applied budget neutrality across the payment system as a whole rather than merely across the participants of this demonstration, consistent with past practice. We stated that 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. For FY 2012, we proposed the estimated amount for the adjustment to the national IPPS rates for FY 2012 to be $52,642,213. For this final rule, we determined that for the 25 hospitals participating in the demonstration project an estimated amount for the adjustment to the national IPPS rates for FY 2012 is $52,452,060. Accordingly, to account for the estimated costs of the demonstration for the specific time periods as explained in detail in section IV.N. of the preamble of this final rule, for FY 2012, we computed a factor of 0.999487 for the rural community hospital demonstration program budget neutrality adjustment that is applied to the IPPS standardized rate. We noted that because the settlement process for the demonstration hospitals’ third and fourth year cost reports, that is, for cost reporting periods starting in FYs 2007 and 2008, has experienced a delay, for the proposed rule, we were unable to state the costs of the demonstration corresponding to FYs 2007 and 2008 for purposes of determining the amount by which the costs of the demonstration corresponding to FYs 2007 and 2008 exceeded the amount offset by the budget neutrality adjustments for FYs 2007 and 2008. As a result, we were unable to propose the specific numeric adjustment representing this offsetting process that would be a component of the budget neutrality adjustment and that would be applied to the national IPPS rates. Therefore, the estimated budget neutrality adjustment to the national IPPS rate in the proposed rule did not include a component to account for these costs. We indicated in the proposed rule that we anticipated that this information may be available for the FY 2012 IPPS/LTCH PPS final rule, at which time, if data from settled cost reports are available, under our proposal, we would incorporate a component into the budget neutrality adjustment to the national IPPS rates to account for the amount by which the demonstration costs corresponding to FY 2007 and FY 2008 exceeded the amount offset by the budget neutrality adjustments for FYs 2007 and 2008. Similarly, for this final rule, we are unable to identify the specific numeric amount representing this offsetting process that can be incorporated into the budget neutrality adjustment applied to the national IPPS rates E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51792 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations due to delays in the settlement process for the demonstration hospitals’ third and fourth year cost reports. We note that we anticipate that they may be available for the FY 2013 IPPS/LTCH PPS proposed and final rules. Therefore, the estimated adjustment to the national IPPS rates in this final rule cannot include a component to account for these costs. g. 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 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 2012 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 2012 Outlier Fixed-Loss Cost Threshold For FY 2012, we proposed to continue to use the same methodology used for FY 2009 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 (73 FR 48763 through 48766) to calculate the outlier threshold. Similar to the methodology used in the FY 2009 IPPS final rule, for FY 2012, we proposed to apply an adjustment factor to the CCRs to account for cost and charge inflation (as explained below). As we have done in the past, to calculate the proposed FY 2012 outlier threshold, we simulated payments by applying proposed FY 2012 rates and policies using cases from the FY 2010 MedPAR files. Therefore, in order to determine the proposed FY 2012 outlier threshold, we inflated the charges on the MedPAR claims by 2 years, from FY 2010 to FY 2012. 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 2009 in combination with the first quarter of FY 2010 (July 1, 2009 through December 31, 2009) to the last quarter of FY 2010 in combination with the first quarter of FY 2011 (July 1, 2010 through December 31, 2010). This rate-of-change was 4.43 percent (1.044394) or 9.07 percent (1.090759) over 2 years. As we have done in the past, we established the proposed FY 2012 outlier threshold using hospital CCRs from the December 2010 update to the ProviderSpecific File (PSF)—the most recent available data at the time of the proposed rule. 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 2012, we proposed to continue to use the same methodology to calculate the CCR adjustment by using the FY 2010 operating cost per discharge increase in combination with the actual FY 2010 operating market basket percentage increase determined by IHS Global Insight, Inc. (IGI), as well as the charge inflation factor described above to estimate the adjustment to the CCRs. (We note that the FY 2010 actual (otherwise referred to as ‘‘final’’) operating market basket percentage increase reflects historical data, whereas the published FY 2010 operating market basket update factor was based on IGI’s 2009 second quarter forecast with historical data through the first quarter of 2009. We also note that while the FY 2010 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 2010 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 PO 00000 Frm 00318 Fmt 4701 Sfmt 4700 from hospital cost reports, we are using two different measures of cost inflation. For FY 2012, we determined the adjustment by taking the percentage increase in the operating costs per discharge from FY 2008 to FY 2009 (1.0285) from the cost report and dividing it by the final operating market basket percentage increase from FY 2009 (1.026). 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 2006 to FY 2007 percentage increase of operating costs per discharge of 1.0465 divided by the FY 2007 final operating market basket percentage increase of 1.036, the FY 2007 to FY 2008 percentage increase of operating costs per discharge of 1.0506 divided by the FY 2008 final operating market basket percentage increase of 1.040). For FY 2012, we averaged the differentials calculated for FY 2007, FY 2008, and FY 2009, which resulted in a mean ratio of 1.0076. We multiplied the 3-year average of 1.0076 by the FY 2010 final operating market basket percentage increase of 1.021, which resulted in an operating cost inflation factor of 2.87 percent or 1.028747. We then divided the operating cost inflation factor by the 1-year average change in charges (1.044394) and applied an adjustment factor of 0.985018 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 2008 to FY 2009 (1.0508) from the cost report and dividing it by the final capital market basket percentage increase from FY 2009 (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 2006 to FY 2007 percentage increase of capital costs per discharge of 1.0507 divided by the FY 2007 final capital market basket percentage increase of 1.013, the FY 2007 to FY 2008 percentage increase of capital costs per discharge of 1.0811 divided by the FY 2008 final capital market basket percentage increase of 1.015). For FY 2012, we averaged the differentials calculated for E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations FY 2007, FY 2008, and FY 2009, which resulted in a mean ratio of 1.0459. We multiplied the 3-year average of 1.0459 by the FY 2010 final capital market basket percentage increase of 1.010, which resulted in a capital cost inflation factor of 5.63 percent or 1.056329. We then divided the capital cost inflation factor by the 1-year average change in charges (1.044394) and applied an adjustment factor of 1.011428 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 2012, we applied the proposed FY 2012 rates and policies using cases from the FY 2010 MedPAR files in calculating the proposed outlier threshold. As discussed in section III.B.3. of the preamble to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in section III.F. of this final rule, in accordance with section 10324(a) of the Affordable Care Act, 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, in order 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 2012, 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 2012. If we did not take into account this provision, our estimate of total FY 2012 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. In the proposed rule, we stated that our estimate of the cumulative effect of changes in documentation and coding due to the adoption of the MS–DRGs through FY 2010 of 5.4 percent is already included within the claims data (FY 2010 MedPAR files) used to calculate the FY 2012 outlier threshold. We also stated in the proposed rule that we estimated that there would be no continued changes in documentation and coding in FYs 2011 and 2012. Therefore, the cumulative effect of documentation and coding that has occurred is already reflected within the FY 2010 MedPAR claims data, and we did not believe there was any need to inflate FY 2010 claims data for any additional case-mix growth projected to have occurred since FY 2010. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Using this methodology, we proposed an outlier fixed-loss cost threshold for FY 2012 equal to the prospective payment rate for the DRG, plus any IME and DSH payments, and any add-on payments for new technology, plus $23,375. As we did in establishing the FY 2009 outlier threshold (73 FR 57891), in our projection of FY 2012 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 indicated that 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 note 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: Commenters, including major hospital associations, stated 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 for outlier payments, there is still room for improvement. The commenters further stated that although CMS currently projects outlier payments in FY 2011 to be estimated at 4.9 percent of total payments, which is lower the 5.1 percent target, this estimate is based on discharges from a prior year and, in their view, 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), their analysis showed that the estimate declined between 0.2 percent and 0.3 percent from the projection. One commenter suggested that the methodology to develop the adjustment factor to the CCRs is unnecessarily complicated and does not lead to a more accurate result. The commenter requested clarification if CMS applies the same CCR throughout the fiscal year within the outlier model. The commenter also 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. Specifically, the commenter recommended that CMS measure the rate of change in CCRs to develop the adjustment factor to the CCRs. Further, in addition to recommending an adjustment to the CCRs based on historical PO 00000 Frm 00319 Fmt 4701 Sfmt 4700 51793 data, the commenter opposed CMS’s methodology of applying the adjustment factor over one year and suggested that the CCRs should be projected over different periods of time, some less or more than one year, based on variations in hospital fiscal year ends. The commenter also opposed CMS’ use of the December 2010 update of the PSF and assert that CMS’s methodology is oversimplified. The commenter believed that its methodology would more accurately project the decline in CCRs. The commenter also suggested that, if CMS did not incorporate the changes described above to its methodology for estimating outlier payments, it would recommend incorporating an ‘‘estimate adjustment factor’’ into the outlier projections. The commenter explained that outlier payments have been underpaid in every year since 2004. Based on actual payments determined by the commenter using data analysis, the commenter asserted that the underpayment has exceeded 0.5 percent in all years except one. The commenter recommended that CMS maintain the outlier threshold at 5.1 percent but apply an estimate adjustment factor when projecting the outlier threshold. The commenter provided an example and computed this factor for FY 2009 and FY 2010 by taking the average variance in the actual payment for FY 2008 and FY 2009 which was 0.491 percent. Based on this factor, CMS would model the threshold to a level of 5.591 percent (5.1 plus .491 percent). If CMS were to overpay outliers, then the adjustment would be become negative. The commenter 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. The commenter responded to CMS’s concerns expressed in last year’s final rule (75 FR 50429) that an ‘‘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 not result in the agency making outlier payments that were not directly related to the actual cost of furnishing care in extraordinarily costly cases. The commenter believed that an ‘‘estimate adjustment factor’’ represents a prospective adjustment factor based on historical data and would not constitute a retroactive adjustment to prior outlier payments because the adjustment would have no impact on past outlier payments. Moreover, the commenter further opined that the estimate adjustment factor would be based on historical outlier cases so payments would be directly related to the actual cost of furnishing care to outlier patients. 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 with comment period (72 FR 47418). In response to the comment that CCRs should be projected over different periods of time, it is possible that some of the E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51794 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 the CCRs. The adjusted CCR is applied throughout the fiscal year within the outlier model. 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. With respect to the comment of computing an ‘‘estimate adjustment factor,’’ we thank the commenter for further explaining their position on this adjustment. Further analysis by CMS is necessary to determine if the commenter’s approach to applying an ‘‘estimate adjustment factor’’ is appropriate. We will consider the commenter’s suggestion of applying an ‘‘estimate adjustment factor’’ in future rulemaking if, based on our analysis, we determine that application of an ‘‘estimate adjustment factor’’ is appropriate and consistent with the statute. Comment: One commenter was concerned that CMS did not include outlier 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 received a similar comment to last year’s rule, and we thank the commenter for again informing us of its 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. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Additionally, we published a manual update (Change Request 7192) to our outlier policy on December 3, 2010, which also updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update outlines the outlier reconciliation process for hospitals and Medicare contractors. The instructions in Change Request 7192 regarding outlier reconciliation were effective on April 1, 2011. Medicare contractors record the outlier reconciliation amount on each provider’s cost report (and are not required to report these data to CMS outside of the cost report settlement process). Therefore, the outlier reconciliation data that the commenter is requesting will be publicly available once the cost report data are posted on our Web site at https://www.cms.gov/CostReports/ 02_HospitalCostReport.asp#TopOfPage. Since April 1, 2011, we have approved some provider’s outlier payments to be reconciled. Other providers that were flagged for outlier reconciliation are still under review for approval. Some providers flagged for outlier reconciliation may experience a delay in reconciling their outlier payments due to circumstances that prevent the Medicare contractor from finalizing the hospital’s cost report (such as other payments that may need to be reconciled aside from outlier payments). As instructed in Change Request 7192, barring an exception from CMS, Medicare contractors were given until October 1, 2011, to complete the reconciliation process for those providers flagged for outlier reconciliation prior to April 1, 2011. To download and view the manual instructions on outlier reconciliation, we refer readers to the CMS Web site: https://www.cms.hhs.gov/manuals/ downloads/clm104c03.pdf. Because we are not making any changes to our methodology for this final rule, for FY 2012, 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 2010 in combination with the second quarter of FY 2010 (October 1, 2009 through March 31, 2010) to the first quarter of FY 2011 in combination with the second quarter of FY 2011 (October 1, 2010 through March 31, 2010). This rate-of-change was 3.89 percent (1.038944) or 7.94 percent (1.079405) over 2 years. As we have done in the past, we established the final FY 2012 outlier threshold using hospital CCRs from the March 2011 update to the ProviderSpecific File (PSF)—the most recent available data at the time of this final rule. For FY 2012, we calculated the CCR adjustment by using the FY 2010 operating cost per discharge increase in combination with the actual FY 2010 operating market basket percentage increase determined by IHS Global Insight, Inc. (IGI), as well as the charge inflation factor described above to estimate the adjustment to the CCRs. (We note that the FY 2010 actual (otherwise referred to as ‘‘final’’) operating market basket percentage increase reflects historical data, whereas the published FY 2010 operating market basket update factor was based on IGI’s 2009 second quarter forecast PO 00000 Frm 00320 Fmt 4701 Sfmt 4700 with historical data through the first quarter of 2009. We also note that while the FY 2010 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 2010 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 2012, we determined the adjustment by taking the percentage increase in the operating costs per discharge from FY 2008 to FY 2009 (1.0290) from the cost report and divided it by the final operating market basket percentage increase from FY 2009 (1.026). 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 2006 to FY 2007 percentage increase of operating costs per discharge of 1.0464 divided by the FY 2007 final operating market basket percentage increase of 1.036, the FY 2007 to FY 2008 percentage increase of operating costs per discharge of 1.0507 divided by FY 2008 final operating market basket percentage increase of 1.040). For FY 2012, we averaged the differentials calculated for FY 2007, FY 2008, and FY 2009, which resulted in a mean ratio of 1.0078. We multiplied the 3-year average of 1.0078 by the FY 2010 final operating market basket percentage increase of 1.021, which resulted in an operating cost inflation factor of 2.87 percent or 1.028913. We then divided the operating cost inflation factor by the 1-year average change in charges (1.038994) and applied an adjustment factor of 0.990297 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 2008 to FY 2009 (1.0494) from the cost report and dividing it by the final capital market basket percentage increase from FY 2009 (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 2006 to FY 2007 percentage increase of capital costs per discharge of 1.0508 divided by the FY 2007 final capital market basket percentage increase of 1.013, the FY 2007 to FY 2008 percentage increase of capital costs per discharge of 1.0813 divided by the FY 2008 final capital market basket percentage increase of 1.015). For FY 2012, E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations we averaged the differentials calculated for FY 2007, FY 2008, and FY 2009, which resulted in a mean ratio of 1.0455. We multiplied the 3-year average of 1.0455 by the FY 2010 final capital market basket percentage increase of 1.010, which resulted in a capital cost inflation factor of 5.6 percent or 1.055964. We then divided the capital cost inflation factor by the 1-year average change in charges (1.038994) and applied an adjustment factor of 1.011428 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. As stated above, for FY 2012, we applied the FY 2012 rates and policies using cases from the FY 2010 MedPAR files in calculating the outlier threshold. As discussed in section III.B.3. of the preamble to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in section III.F. of this final rule, in accordance with section 10324(a) of the Affordable Care Act, 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, in order 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 2012, 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 2012. If we did not take into account this provision, our estimate of total FY 2012 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, for this final rule, our estimate of the cumulative effect of changes in documentation and coding due to the adoption of the MS–DRGs through FY 2010 of 5.4 percent is already included within the claims data (FY 2010 MedPAR files) used to calculate the FY 2012 outlier threshold. Also, we estimate that there will be no continued changes in documentation and coding in FYs 2011 and 2012. Therefore, the cumulative effect of documentation and coding that has occurred is already reflected within the FY 2010 MedPAR claims data, and we did not believe there was any need to inflate FY 2010 claims data for any additional case-mix growth projected to have occurred since FY 2010. Using this methodology, we calculated a final outlier fixed-loss cost threshold for FY 2012 equal to the prospective payment rate VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 for the DRG, plus any IME and DSH payments, and any add-on payments for new technology, plus $22,385. We note that our final threshold is less than the proposed threshold. We believe this is due to the increase in the standardized amount from the proposed rule to the final rule. (Some examples that caused the standardized amount to increase from the proposed rule to this final rule include, but are not limited to, the increase in the market basket update and the decreases in the multifactor productivity adjustment and our prospective documentation and coding adjustment). As payments increase, fewer cases will qualify for outlier payments thus requiring us to lower the threshold from the proposed rule to this final rule. (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 2012 will result in outlier payments that will equal 5.1 percent of operating DRG payments and 6.18 percent of capital payments based on the Federal rate. In accordance with section 1886(d)(3)(B) of the Act, as we proposed, we are reducing the FY 2012 standardized amount by the same percentage to account for the projected proportion of payments paid as outliers. The outlier adjustment factors that are applied to the standardized amount based on the FY 2012 outlier threshold are as follows: Operating standardized amounts National ..... Puerto Rico 0.948990 0.953549 Capital federal rate 0.938207 0.926153 We are applying the outlier adjustment factors to the FY 2012 rates after removing the effects of the FY 2011 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, we calculate operating and capital CCR ceilings and assign a statewide average CCR for hospitals whose CCRs exceed 3.0 standard deviations from the mean of the log distribution of CCRs for all hospitals. Based on this calculation, for hospitals for which the fiscal intermediary or MAC computes operating CCRs greater than 1.152 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), statewide average CCRs are used to determine whether PO 00000 Frm 00321 Fmt 4701 Sfmt 4700 51795 a hospital qualifies for outlier payments. Table 8A listed in section VI. of this Addendum (and available only via the Internet) contains the statewide average operating CCRs for urban hospitals and for rural 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, 2011, these statewide average ratios will replace the ratios published in the IPPS final rule for FY 2011 (75 FR 50390–50392). Table 8B listed in section VI. of this Addendum (and available via the Internet) contains the comparable statewide average capital CCRs. Again, the CCRs in Tables 8A and 8B will be used during FY 2012 when hospital-specific CCRs based on the latest settled cost report are either not available or are outside the range noted above. Table 8C listed in section VI. of this Addendum (and available via the Internet) 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. Additionally, as mentioned above, we published an additional manual update (Change Request 7192) to our outlier policy on December 3, 2010 which also updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update outlines the outlier reconciliation process for hospitals and Medicare contractors. To download and view the manual instructions on outlier reconciliation, we refer readers to the CMS Web site: https:// www.cms.hhs.gov/manuals/downloads/ clm104c03.pdf. (3) FY 2010 and FY 2011 Outlier Payments In the FY 2011 IPPS final rule (75 FR 50431), we stated that, based on available data, we estimated that actual FY 2010 outlier payments would be approximately 4.7 percent of actual total DRG payments. This estimate was computed based on simulations using the FY 2009 MedPAR file (discharge data for FY 2009 claims). That is, the estimate of actual outlier payments did not reflect actual FY 2010 claims, but instead reflected the application of FY 2010 rates and policies to available FY 2009 claims. Our current estimate, using available FY 2010 claims data, is that actual outlier E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51796 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations payments for FY 2010 were approximately 4.7 percent of actual total DRG payments. Thus, the data indicate that, for FY 2010, the percentage of actual outlier payments relative to actual total payments is lower than we projected for FY 2010. 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 2010 are equal to 5.1 percent of total DRG payments. We currently estimate that actual outlier payments for FY 2011 will be approximately 4.8 percent of actual total DRG payments, approximately 0.3 percentage points lower than the 5.1 percent we projected when setting the outlier policies for FY 2011. This estimate of 4.8 percent is based on simulations using the FY 2010 MedPAR file (discharge data for FY 2010 claims). Comment: Commenters disagreed with CMS’ use of modeled data versus actual payment data to compute the outlier payment percentage for FY 2010. The commenters stated that they performed their own analysis using actual payment information in the MedPAR file which resulted in outlier payments being 4.36 percent of actual DRG payments for FY 2010. The commenters recommended that CMS determine the FY 2010 outlier payment percentage using actual payments rather than modeled payments. The commenters disagreed with CMS’ reasons in the FY 2011 final rule (75 FR 50431) for using modeled data instead of actual data. In last year’s final rule, CMS supported its decision to use modeled data in part because ‘‘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.’’ The commenters stated that while this is true, the argument applies equally to modeling payments from the MedPAR data. The commenters explained that if a claim is cancelled after the MedPAR file is built, the modeled payment for that claim will be included in overall estimates. The commenters further noted that, in last year’s final rule, CMS expressed concern that SCHs and MDHs complicates the use of the payment field shown on the MedPAR file (75 FR 50431). The commenter disagreed with CMS and stated that CMS’ argument is valid for determining the DRG-based operating payments needed to calculate outlier payment levels; however, the SCH/MDH argument does not apply to outlier payments. The commenters claimed that ‘‘the PRICER program determines outlier payments for all hospitals, including SCH/MDHs, based on the Federal rate only.’’ The commenters added that ‘‘the outlier payments are recorded in the ‘‘OUTLIER AMOUNT’’ field (and not included in the DRG PRICE).’’ Therefore, the commenters asserted that ‘‘obtaining the outlier payments directly from the MedPAR file does not introduce complications related to the SCH/MDH status.’’ Moreover, the commenters noted ‘‘that SCH/MDH hospitals represent a small percent of hospitals overall.’’ VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 The commenters also requested further clarification regarding how CMS conducted its analysis that showed an outlier payment percentage of 4.7 percent for FY 2010. The commenters specifically requested that CMS disclose what CCRs were used to develop the FY 2010 estimate payment set forth in the proposed rule, and state whether the same CCRs or different CCRs were used to determine the FY 2010 payments as set forth in the FY 2011 proposed and final rules. Response: We continue to believe that modeling FY 2010 outlier payments is a reasonable approach to compute the outlier payment percentage for that year. Similar to our response in the FY 2011 final rule, to determine the FY 2010 outlier estimate, we used the FY 2010 PRICER and the latest update of the FY 2010 MedPAR file to model actual outlier payments for FY 2009. Although the MedPAR does contain the actual payment amounts to hospitals, we still believe that modeling actual outlier payments for FY 2010 produces an enhanced accuracy of actual outlier payments. For example, we model which SCHs would have greater hospital-specific payment amounts versus their Federal payments, (similar to what is currently done at cost report settlement) and exclude those providers from our determination of FY 2010 actual outlier payments. Also, we believe modeling actual outlier payments for FY 2010 is consistent with our approach of using modeling for the rate setting for FY 2011 (which also models the FY 2010 payments for use in the FY 2011 rate setting). The commenters noted that that if a claim is cancelled after the MedPAR file is built, the modeled payment for that claim will also be included in overall estimates. While the commenter is correct, this concern is relevant regardless of whether we use actual data or modeled data to compute the outlier payment percentage. Therefore, we do not believe that this argument supports the use of actual payment data instead of modeled data. As stated above, we continue to believe that modeling that outlier payment percentage presents more accuracy. We disagree with the commenter that obtaining the outlier payments directly from the MedPAR file does not introduce complications related to the SCH/MDH status. Specifically, if an SCH or MDH is paid at the end of its cost reporting year based on its target amount, then including the payment in the ‘‘Outlier Amount’’ field in the outlier payment percentage would distort the computation of the outlier payment percentage because the hospital’s actual payment was based on its target amount and not the federal standardized amount. Therefore, as mentioned above, we model which SCHs would have greater hospitalspecific payment amounts versus payments based on the standardized amount (similar to what is currently done at cost report settlement), and we then exclude those providers from our determination of FY 2010 outlier percentage payout. Because we are modeling which SCHs would have greater hospital-specific payment amounts versus their Federal payments, we believe it is appropriate to model the outlier percentage payout. PO 00000 Frm 00322 Fmt 4701 Sfmt 4700 Without further detail from the commenters, we are unable to determine why the commenters were unable to duplicate our estimate of the FY 2010 outlier percentage payout. However, to provide further clarification of the CCRs used to model the FY 2010 outlier percentage payout, we used CCRs from the March 2010 update of the PSF. This is the same file that was used to compute the FY 2010 outlier percentage payout in the FY 2011 proposed and final rules. 5. FY 2012 Standardized Amount The adjusted standardized amount is divided into labor-related and nonlaborrelated portions. Tables 1A and 1B listed and published in section VI. of this Addendum (and available via the Internet) contain the national standardized amounts that we are applying to all hospitals, except hospitals located in Puerto Rico, for FY 2012. The Puerto Rico-specific amounts are shown in Table 1C listed and published in section VI. of this Addendum (and available via the Internet). 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 1.9 percent for FY 2012, and an update of -0.1 percent 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 2012 are set forth in Table 1C listed and published in section VI. of this Addendum (and available via the Internet). 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 2011 national standardized amount. The second column shows the changes from the FY 2011 standardized amounts for hospitals that satisfy the quality E:\FR\FM\18AUR2.SGM 18AUR2 51797 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations (through FY 2011) average standardized amount after restoring the FY 2011 offsets for outlier payments, demonstration budget neutrality and the geographic reclassification budget neutrality. The DRG reclassification data submission requirement and therefore receive the full update of 1.9 percent. The third column shows the changes for hospitals receiving the reduced update of -0.1 percent. The first row of the table shows the updated and recalibration wage index budget neutrality factors are cumulative. Therefore, the FY 2011 factor is not removed from this table. COMPARISON OF FY 2011 STANDARDIZED AMOUNTS TO THE FY 2012 STANDARDIZED AMOUNT WITH FULL AND REDUCED UPDATE Full Update (1.9 percent); Wage index is greater than 1.0000 FY 2011 Base Rate, after removing geographic reclassification budget neutrality, demonstration budget neutrality, cumulative FY 2008 and FY 2009 documentation and coding adjustment, FY 2011 documentation and coding recoupment, and outlier offset (based on the labor–related share percentage for FY 2011) .............. FY 2012 Update Factor ................... Adjustment for Restoring Rural Floor Budget Neutrality ................ FY 2012 DRG Recalibration and Wage Index Budget Neutrality Factor ........................................... FY 2012 Reclassification Budget Neutrality Factor ........................... FY 2012 Rural Demonstration Budget Neutrality Factor .............. FY 2012 Outlier Factor .................... Documentation and coding adjustments required under sections 7(b)(1)(A) and 7(b)(1)(B) of Public Law 110–90 .................................. Final Rate for FY 2012 .................... Full Update (1.5 percent); Wage index is less than or equal to 1.0000 Reduced Update (¥0.1 percent); Wage index is greater than 1.0000 Reduced Update (¥0.1 percent); Wage index is less than or equal to 1.0000 Labor: $3,947.65 Nonlabor: $1,790.21 1.019 Labor: $3,557.48 Nonlabor: $2,180.39 1.019 Labor: $3,947.65 Nonlabor: $1,790.21 0.999 Labor: $3,557.48 Nonlabor: $2,180.39 0.999 1.011 1.011 1.011 1.011 0.99846 0.99846 0.99846 0.99846 0.991493 0.991493 0.991493 0.991493 0.999487 0.948990 0.999487 0.948990 0.999487 0.948990 0.999487 0.948990 0.9386 Labor: $3,584.30 Nonlabor: $1,625.44 0.9386 Labor: $3,230.04 Nonlabor: $1,979.70 0.9386 Labor: $3,513.95 Nonlabor: $1,593.54 0.9386 Labor: $3,166.64 Nonlabor: $1,940.85 B. Adjustments for Area Wage Levels and Cost-of-Living Tables 1A through 1C, as published in section VI. of this Addendum (and available via the Internet), contain the labor-related and nonlabor-related shares that we used to calculate the prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico for FY 2012. 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. mstockstill on DSK4VPTVN1PROD with RULES2 1. Adjustment for Area Wage Levels Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that we make an adjustment to the 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 data and methodology for the FY 2012 wage index. 2. Adjustment for Cost-of-Living in Alaska and Hawaii Section 1886(d)(5)(H) of the Act authorizes the Secretary to make an adjustment to take into account the unique circumstances of hospitals located in Alaska and Hawaii. Higher labor-related costs for these two States are taken into account in the adjustment for area wages described above. For FY 2011 and in prior fiscal years, we used the most recent updated cost of living adjustment (COLA) factors obtained from the U.S. Office of Personnel Management (OPM) Web site at https://www.opm.gov/oca/cola/rates.asp. We multiply the nonlabor-related portion of the standardized amount by the applicable adjustment factor. Sections 1911 through 1919 of the Nonforeign Area Retirement Equity Assurance Act, as contained in subtitle B of title XIX of the National Defense Authorization Act (NDAA) for Fiscal Year 2010 (Pub. L. 111–84, October 28, 2009) transitions the Alaska and Hawaii COLAs to locality pay. Under section 1914 of Public Law 111–84, locality pay is being phased in over a 3-year period beginning in January PO 00000 Frm 00323 Fmt 4701 Sfmt 4700 2010 with COLA rates frozen as of the date of enactment, October 28, 2009, and then proportionately reduced to reflect the phasein of locality pay. In the proposed rule, we stated that we did not believe it was appropriate to use either the 2010 or 2011 reduced factors for adjusting the nonlabor-related portion of the standardized amount for hospitals in Alaska and Hawaii for Medicare payment purposes. Therefore, for FY 2012, we proposed to continue to use the same COLA factors (published by OPM) that we used to adjust payments in FY 2011 (which are based on OPMs 2009 COLA factors) to adjust the nonlabor-related portion of the standardized amount for hospitals located in Alaska and Hawaii. We stated that we believe using these COLAs will appropriately adjust the nonlabor-related portion of the standardized amount for hospitals in Alaska and Hawaii consistent with section 1886(d)(5)(H) of the Act. We did not receive any public comments on our proposal. Therefore, we are finalizing our proposal to use the same factors currently in use under the IPPS for FY 2011 for FY 2012. Below is a table of factors obtained from OPM that we are using for FY 2012. E:\FR\FM\18AUR2.SGM 18AUR2 51798 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations TABLE OF COST-OF-LIVING ADJUSTMENT FACTORS: ALASKA AND HAWAII HOSPITALS Cost of living adjustment factor Area Alaska: City of Anchorage and 80-kilometer (50-mile) radius by road ................................................................................................. City of Fairbanks and 80-kilometer (50-mile) radius by road .................................................................................................. City of Juneau and 80-kilometer (50-mile) radius by road ...................................................................................................... Rest of Alaska .......................................................................................................................................................................... Hawaii: City and County of Honolulu .................................................................................................................................................... County of Hawaii ...................................................................................................................................................................... County of Kauai ........................................................................................................................................................................ County of Maui and County of Kalawao .................................................................................................................................. 1.23 1.23 1.23 1.25 1.25 1.18 1.25 1.25 (The above factors are based on data obtained from the U.S. Office of Personnel Management Web site at: https://www.opm.gov/oca/cola/ rates.asp.) mstockstill on DSK4VPTVN1PROD with RULES2 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 listed in section VI. of this Addendum (and available via the Internet) contains the relative weights that we are applying to discharges occurring in FY 2012. 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 2012 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 2012 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 2012 equals the higher of the applicable Federal rate, or the hospital-specific rate as described below. The prospective payment rate for MDHs for FY 2012 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, whichever yields the greatest aggregate payment. The prospective payment rate for hospitals located in Puerto Rico for FY 2012 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 the hospital submitted qualifying quality data (full update for hospitals submitting quality data; update including a ¥2.0 percent adjustment for hospitals that did not submit these data). 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 (Table 5 listed in section VI. of this Addendum and available via the Internet). 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 the formula described in section IV.E. of the preamble of this final rule. 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 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 PO 00000 Frm 00324 Fmt 4701 Sfmt 4700 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). b. Updating the FY 1982, FY 1987, FY 1996, FY 2002, and FY 2006 Hospital-Specific Rates for FY 2012 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 subject to the amendments to section 1886(b)(3)(B) of the Act made by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the applicable percentage increase to the hospital-specific rates applicable to SCHs and MDHs is 1.9 percent (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent less an adjustment of 1.0 percentage point for multifactor productivity and less 0.1 percentage point) for hospitals that submit quality data or ¥0.1 percent (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent, less 2.0 percentage points for failure to submit data under the Hospital IQR Program, less an adjustment of 1.0 percentage point for multifactor productivity, and less 0.1 percentage point) for hospitals that fail to submit quality data. For a complete discussion of the applicable percentage increase applicable to the hospital-specific rates for SCHs and MDHs, we refer readers to section IV.H. of the preamble of this final rule. E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations In addition, because SCHs and MDHs use the same MS–DRGs as other hospitals when they are paid based in whole or in part on the hospital-specific rate, the hospitalspecific rate is adjusted by a budget neutrality factor to ensure that changes to the DRG classifications and the recalibration of the DRG relative weights are made in a manner so that aggregate IPPS payments are unaffected. Therefore, for both SCHs and MDHs, the hospital-specific rate is adjusted by the DRG reclassification and recalibration budget neutrality factor of 0.997903, as discussed in section III. of this Addendum. The resulting rate is used in determining the payment rate an SCH or MDH will receive for its discharges beginning on or after October 1, 2011. c. Documentation and Coding Adjustment to the FY 2012 Hospital-Specific 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. Therefore, as discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50426) and in section II.D. of the preamble of this final rule, 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 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 we discuss 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 ¥5.4 percent is required to eliminate the full effect of the documentation and coding changes on future payments to SCHs and MDHs. Unlike the case of standardized amounts paid to IPPS hospitals, prior to FY 2011 we had not made any previous adjustments to the hospital specific rates paid to SCHs and MDHs to account for documentation and coding changes. Consequently, in order to maintain consistency as far as possible with the adjustments applied to IPPS hospitals, we made an adjustment of ¥2.9 percent in FY VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 2011 to the hospital-specific rates paid to SCHs and MDHs. As discussed above, we are making a ¥2.0 percent documentation and coding adjustment for IPPS hospitals in FY 2012 (¥2.0 percent prospective adjustment plus a ¥2.9 percent recoupment adjustment in FY 2012, offset by the removal of the ¥2.9 percent recoupment adjustment for FY 2011). We believe that any adjustment to the hospital-specific rate due to documentation and coding effect should be as similar as possible to adjustments to the IPPS rate. Accordingly, we are making a ¥2.0 percent payment adjustment to the hospital-specific rate. We believe that a prospective adjustment of ¥2.0 percent allows CMS to maintain, to the extent possible, similarity and consistency in payment rates for different IPPS hospitals paid using the MS– DRG. d. Adjustment To Restore Prior Rural Floor Budget Neutrality Offsets As discussed in section II.A.4.d. of this Addendum, in light of the Cape Cod decision, we are adjusting hospital-specific amounts by 0.9 percent to restore to these amounts the offset for the rural floor and imputed floor in prior years. Our rationale and methodology for such adjustment are explained in section II.A.4.d of this Addendum. As with the standardized amount, we are returning 0.7 percentage point for FYs 1998 through 2004, and 0.2 percentage point for FY 2005 to the hospitalspecific rates. We note that, in the FY 2006 IPPS final rule (70 FR 47429 and 47430), beginning in FY 2006, we changed our methodology and began applying only the DRG reclassification and recalibration budget neutrality factor to the hospital-specific rates. Because the rural floor budget neutrality adjustment was not applied to the hospitalspecific rates in FYs 2006 and 2007, we are not including FY 2006 and FY 2007 in our assessment. Therefore, to remove the effects of the rural floor from the hospital-specific rates for FYs 1998 through 2005, we are applying a one-time permanent adjustment of 0.9 percent to the hospital-specific rates (that is, a factor of 1.009). We received comments requesting complete explanations of the methodologies and data used in the calculation of the 1.1 and 0.9 percent adjustments to the standardized amount and hospital-specific rate. A complete summary and response to this comment can be found above in section II.A.4.d. of this Addendum. 3. General Formula for Calculation of Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning on or After October 1, 2011, and Before October 1, 2012 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 PO 00000 Frm 00325 Fmt 4701 Sfmt 4700 51799 applicable wage index (Table 1C published in section VI. of this Addendum and available via the Internet). 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 listed in section VI. of this Addendum and available via the Internet). 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 listed in section VI. of this Addendum and available via the Internet). 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 is then 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 2012 The PPS for acute care hospital inpatient capital-related costs was implemented for cost reporting periods beginning on or after October 1, 1991. Effective with that cost reporting period, hospitals were paid during a 10-year transition period (which extended through FY 2001) to change the payment methodology for Medicare acute care hospital inpatient 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 2012, which is effective for discharges occurring on or after October 1, 2011. 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51800 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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) also 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 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 (we refer readers to VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 § 412.348(b) of our regulations). 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 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 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 PO 00000 Frm 00326 Fmt 4701 Sfmt 4700 rate and 75 percent of the national capital Federal rate for discharges occurring on or after October 1, 2004 (69 FR 49185). A. Determination of Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update In the discussion that follows, we explain the factors that we used to determine the capital Federal rate for FY 2012. In particular, we explain why the FY 2012 capital Federal rate increases approximately 0.3 percent, compared to the FY 2011 capital Federal rate. As discussed in the impact analysis in Appendix A of this final rule, we estimate that capital payments per discharge will increase 1.8 percent during that same period. Because capital payments constitute about 10 percent of hospital payments, a 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 2012 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 1.5 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 2010 DRG reclassification and recalibration, and a forecast error correction of 0.0 percent. As discussed below in section III.C. of this Addendum, we continue to believe that the CIPI is the most appropriate input price index for capital costs to measure capital price changes in a given year. We also explain the basis for the FY 2012 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 are applying a -1.0 percent adjustment to the capital rate in FY 2012 to account for the 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 are applying in the update framework for FY 2012. 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations weight DRG assignments (‘‘coding effects’’); and • The annual DRG reclassification and recalibration changes may not be budget neutral (‘‘reclassification effect’’). We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients as opposed to changes in documentation and coding behavior that result in assignment of cases to higher weighted DRGs but do not reflect higher resource requirements. The capital update framework includes the same case-mix index adjustment used in the former operating IPPS update framework (as 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).) For FY 2012, 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 2012. The net adjustment for change in case-mix is the difference between the projected real increase in case-mix and the projected total increase in case-mix. Therefore, as we proposed, the net adjustment for case-mix change in FY 2012 is 0.0 percentage point. 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 2year 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 2010 DRG reclassification and recalibration as part of our update for FY 2012. To adjust for reclassification and recalibration effects, under our historical methodology, we would run the FY 2010 cases through the FY 2009 GROUPER and through the FY 2010 GROUPER. If the resulting ratio of the casemix indices did not equate to 1.0, in the update framework for FY 2012, we would make an adjustment to account for the reclassification and recalibration effects in FY 2010. In the update framework for FY 2011 (the FY 2011 IPPS final rule (75 FR 50435)), we did not adjust for reclassification and recalibration effects from FY 2009 because it was accounted for in the documentation and coding adjustment to the capital Federal rates for FY 2011. For FY 2012, we are not performing an analysis of changes in case-mix in FY 2010 due to the effect of documentation and coding, as this would be most consistent with our approach under the operating IPPS. Therefore, at this time, under our broad authority in section 1886(g) of the Act, as we proposed, we are making a 0.0 percent adjustment for reclassification and recalibration in the update framework. We may evaluate the effect of FY 2010 reclassification and VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 recalibration if we perform an analysis of the documentation and coding effect in FY 2010 in future rulemaking. 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 point 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 -0.2 percentage point was calculated for the FY 2012 update. That is, current historical data indicate that the forecasted FY 2010 CIPI (1.2 percent) used in calculating the FY 2010 update factor was 0.2 percentage point higher than the actual realized price increases (1.0 percent). The two primary contributing factors for the FY 2010 CIPI forecast being slightly higher than the actual FY 2010 increase in the CIPI were that the prices for the nonprofit and government interest cost category grew slower than what had been forecasted, and the prices for the other capital expenses cost category also grew slower than what had been forecasted. Because the estimation of the FY 2010 forecast error for the CIPI is not greater than 0.25 percentage point, as we proposed, we are making a 0.0 percent adjustment for forecast error in the update for FY 2012. Under the capital IPPS update framework, we also make an adjustment for changes in intensity. Historically, we 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 reflected 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 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. PO 00000 Frm 00327 Fmt 4701 Sfmt 4700 51801 We 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 casemix 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. 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, as noted above. For much of the last decade, 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 for intensity in each of those years. Therefore, for FY 2011, in an effort to further refine the intensity adjustment and more accurately reflect allowable changes in hospital intensity, we revised our intensity measure to use changes in hospital costs per discharge over a 5-year average rather than changes in hospital charges, which had 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. As discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50436), 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. In this final rule, for FY 2012, as we proposed, we are using an intensity measure that is based on a 5-year adjusted average of cost per discharge, as we did for FY 2011. Therefore, the intensity measure for FY 2012 is based on an average of cost per discharge data from the 5-year period beginning with FY 2005 and extending through FY 2009. Based on these data, we estimated that case-mix constant intensity declined during FYs 2005 through 2009. In the past, when we found intensity to be declining, we believed a zero (rather than negative) intensity adjustment was appropriate. Consistent with this approach, because we estimate that intensity declined during that 5-year period, we believe it is appropriate to continue to apply a zero intensity adjustment for FY 2012. Therefore, as we proposed, we are making a 0.0 percent adjustment for intensity in the update for FY 2012. 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 2012 as shown in the table below. E:\FR\FM\18AUR2.SGM 18AUR2 51802 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations CMS FY 2012 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 ..................................................................................................................................................................................... Effect of FY 2010 Reclassification and Recalibration ............................................................................................................................. Forecast Error Correction ........................................................................................................................................................................ 1.5 0.0 0.0 Total Update ..................................................................................................................................................................................... 1.5 mstockstill on DSK4VPTVN1PROD with RULES2 b. Comparison of CMS and MedPAC Update Recommendation In its March 2011 Report to Congress, MedPAC did not make a specific update recommendation for capital IPPS payments for FY 2012. (MedPAC’s Report to the Congress: Medicare Payment Policy, March 2011, Chapter 3). 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 2011, we estimated that outlier payments for capital would equal 5.96 percent of inpatient capital-related payments based on the capital Federal rate in FY 2011. 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 6.18 percent for inpatient capitalrelated payments based on the capital Federal rate in FY 2012. Therefore, we are applying an outlier adjustment factor of 0.9382 in determining the capital Federal rate. Thus, we estimate that the percentage of capital outlier payments to total capital standard payments for FY 2012 will be slightly higher than the percentage for FY 2011. This slight increase in estimated capital outlier payments is primarily due to the decrease in the outlier threshold used to identify outlier cases for both inpatient operating and inpatient capital-related payments, which is discussed in section II.A. of this Addendum. That is, because the outlier threshold used to identify outlier cases is lower, cases will receive higher outlier payments and more cases will qualify for outlier payments. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 The outlier reduction factors are not built permanently into the capital rates; that is, they are not applied cumulatively in determining the capital Federal rate. The FY 2012 outlier adjustment of 0.9382 is a ¥0.23 percent change from the FY 2011 outlier adjustment of 0.9404. Therefore, the net change in the outlier adjustment to the capital Federal rate for FY 2012 is 0.9977 (0.9382/0.9404). Thus, the outlier adjustment will decrease the FY 2012 capital Federal rate by 0.23 percent compared with the FY 2011 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. PO 00000 Frm 00328 Fmt 4701 Sfmt 4700 1.5 0.0 Therefore, we no longer use the capital cost model. Furthermore, as discussed below, special exceptions payments will no longer be made in FY 2012, and an exceptions payment adjustment factor will no longer be necessary, as there are no remaining hospitals eligible to receive special exceptions payments. To determine the proposed factors for FY 2012, we compared (separately for the national capital rate and the Puerto Rico capital rate) estimated aggregate capital Federal rate payments based on the FY 2011 MS–DRG classifications and relative weights and the FY 2011 GAF to estimated aggregate capital Federal rate payments based on the FY 2011 MS–DRG classifications and relative weights and the FY 2012 GAFs. To achieve budget neutrality for the changes in the national GAFs, based on calculations using updated data, we are applying an incremental budget neutrality adjustment of 1.0010 for FY 2012 to the previous cumulative FY 2011 adjustment of 0.9902, yielding an adjustment of 0.9912, through FY 2012. For the Puerto Rico GAFs, we are applying an incremental budget neutrality adjustment of 1.0085 for FY 2012 to the previous cumulative FY 2011 adjustment of 0.9965, yielding a cumulative adjustment of 1.0049 through FY 2012. We then compared estimated aggregate capital Federal rate payments based on the FY 2011 DRG relative weights and the FY 2012 GAFs to estimate aggregate capital Federal rate payments based on the cumulative effects of the FY 2012 MS–DRG classifications and relative weights and the FY 2012 GAFs. The incremental adjustment for DRG classifications and changes in relative weights is 0.9994 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 2012 are 0.9905 nationally and 1.0043 for Puerto Rico. We note that all the values are calculated with unrounded numbers. The following table summarizes the adjustment factors for each fiscal year: E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 51803 BUDGET NEUTRALITY ADJUSTMENT FOR DRG RECLASSIFICATIONS AND RECALIBRATION AND THE GEOGRAPHIC ADJUSTMENT FACTORS National Puerto Rico Incremental adjustment Fiscal year Incremental adjustmant Geographic adjustment factor 1992 ................. 1993 ................. 1994 ................. 1995 ................. 1996 ................. 1997 ................. 1998 ................. 1999 ................. 2000 ................. 2001 1 ............... 2001 2 ............... 2002 ................. 2003 5 ............... 2003 6 ............... 2004 8 ............... 2004 10 .............. 2005 11 .............. 2005 13 .............. 2006 ................. 2007 ................. 2008 ................. 2009 15 .............. 2010 16 .............. 2011 17 .............. 2012 18 .............. DRG Reclassifications and recalibration Combined ...................... ...................... ...................... ...................... ...................... ...................... ...................... 0.99944 0.99857 0.99782 0.99771 3 0.99666 4 0.99915 0.99896 7 1.00175 9 1.00164 9 0.99967 12 0.99946 12 1.00185 14 1.00000 1.00172 1.00206 0.99989 0.99989 1.00104 ...................... ...................... ...................... ...................... ...................... ...................... ...................... 1.00335 0.99991 1.00009 1.00009 3 0.99668 4 0.99662 0.99662 7 1.00081 9 1.00081 9 1.00094 1.00094 0.99892 0.99858 0.99792 0.99945 0.99945 0.99914 0.99935 ...................... 0.99800 1.00531 0.99980 0.99940 0.99873 0.99892 1.00279 0.99848 0.99791 0.99780 3 0.99335 4 0.99577 0.99558 7 1.00256 9 1.00245 9 1.00061 12 1.00040 12 1.00076 14 0.99858 0.99963 1.00150 0.99941 0.99903 1.00039 Cumulative 1.00000 0.99800 1.00330 1.00310 1.00250 1.00123 1.00015 1.00294 1.00142 0.99933 0.99922 0.99268 0.98848 0.98830 0.99083 0.99072 0.99137 0.99117 0.99198 0.99057 0.99021 0.99170 0.99112 0.99016 0.99054 Geographic adjustment factor DRG Reclassifications and recalibration Combined ...................... ...................... ...................... ...................... ...................... ...................... ...................... 0.99898 0.99910 1.00365 1.00365 3 0.98991 4 1.00809 1.00809 1.00028 1.00028 0.99115 0.99115 1.00762 1.00234 1.00079 1.00097 1.00141 1.00050 1.00845 ...................... ...................... ...................... ...................... ...................... ...................... ...................... 1.00335 0.99991 1.00009 1.00009 3 0.99668 4 0.99662 0.99662 1.00081 1.00081 1.00094 1.00094 0.99892 0.99858 0.99792 0.99945 0.99953 0.99914 0.99935 ...................... ...................... ...................... ...................... ...................... ...................... ...................... 1.00233 0.99901 1.00374 1.00374 3 0.99662 4 1.00468 1.00468 1.00109 1.00109 0.99208 0.99208 1.00653 1.00092 0.99870 1.00041 1.00094 0.999564 1.00780 Cumulative ...................... ...................... ...................... ...................... ...................... ...................... 1.00000 1.00233 1.00134 1.00508 1.00508 0.99164 0.99628 0.99628 0.99736 0.99736 0.98946 0.98946 0.99592 0.99683 0.99554 0.99595 0.99688 0.99652 1.00429 1 Factors effective for the first half of FY 2001 (October 2000 through March 2001). effective for the second half of FY 2001 (April 2001 through September 2001). factors are applied to FY 2000 cumulative factors. 4 Incremental factors are applied to the cumulative factors for the first half of FY 2001. 5 Factors effective for the first half of FY 2003 (October 2002 through March 2003). 6 Factors effective for the second half of FY 2003 (April 2003 through September 2003). 7 Incremental factors are applied to FY 2002 cumulative factors. 8 Factors effective for the first half of FY 2004 (October 2003 through March 2004). 9 Incremental factors are applied to the cumulative factors for the second half of FY 2003. 10 Factors effective for the second half of FY 2004 (April 2004 through September 2004). 11 Factors effective for the first quarter of FY 2005 (September 2004 through December 2004). 12 Incremental factors are applied to average of the cumulative factors for the first half (October 1, 2003 through March 31, 2004) and second half (April 1, 2004 through September 30, 2004) of FY 2004. 13 Factors effective for the last three quarters of FY 2005 (January 2005 through September 2005). 14 Incremental factors are applied to average of the cumulative factors for 2005. 15 Final factors for FY 2009, including the implementation of section 124 of Public Law 110–275, which affects wage indices and GAFs for FY 2009. 16 Final revised factors for FY 2010 which reflect the effect of the provisions of the Affordable Care Act. 17 Final factors for FY 2011. 18 Final factors for FY 2012. 2 Factors mstockstill on DSK4VPTVN1PROD with RULES2 3 Incremental The methodology used to determine the recalibration and geographic adjustment factor (GAF/DRG) budget neutrality adjustment is similar to the methodology used in establishing budget neutrality adjustments under the IPPS for operating costs. One difference is that, under the operating IPPS, the budget neutrality adjustments for the effect of geographic reclassifications are determined separately from the effects of other changes in the hospital wage index and the DRG relative weights. Under the capital IPPS, there is a single 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, VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 2011, we established a GAF/DRG budget neutrality factor of 0.9990 (75 FR 50437). For FY 2012, we are establishing a GAF/DRG budget neutrality factor of 1.0004. 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 2011 to FY 2012 is 1.0004. The PO 00000 Frm 00329 Fmt 4701 Sfmt 4700 cumulative change in the capital Federal rate due to this adjustment is 0.9905 (the product of the incremental factors for FYs 1995 through 2011 and the incremental factor of 1.0004 for FY 2012). (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 0.9905 for FY 2012.) 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 2012 geographic reclassification decisions made by the MGCRB compared to FY 2011 decisions. However, it does not account for changes in payments due to changes in the DSH and IME adjustment factors. E:\FR\FM\18AUR2.SGM 18AUR2 51804 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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. Since FY 2002, an adjustment for regular exception payments was no longer necessary in determining the capital Federal rate because, in accordance with § 412.348(b), regular exception payments were only made for cost reporting periods beginning on or after October 1, 1991 and before October 1, 2001. Accordingly, in FY 2002 and subsequent fiscal years, no payments are made under the regular exceptions provision (66 FR 39949). Furthermore, there are no longer any remaining hospitals eligible to receive a special exceptions payment under § 412.348(g) because they have reached the limitation on the period for exception payments under § 412.348(g)(7). A hospital qualifying for a special exceptions payment could receive exceptions payments for up to 10 years from the year in which it completed a project that met the applicable criteria under § 412.348(g). However, the project had to be completed no later than the end of the hospital’s last cost reporting period beginning before October 1, 2001. Therefore, FY 2012 will be the final year any hospital could have received a special exceptions payment. However, as we indicated above, based on the date the projects were completed, there are no remaining hospitals eligible to receive a special exceptions payment in FY 2012, which negates the need for a special exceptions adjustment for FY 2012. Furthermore, we note that special exceptions adjustments will no longer be made in subsequent years because FY 2012 is the final year payments could have been made to eligible hospitals in accordance with § 412.348(g)(7). In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50439), we estimated that total (special) exceptions payments for FY 2011 would equal 0.04 percent of aggregate payments based on the capital Federal rate. Therefore, we applied an exceptions adjustment factor of 0.9996 (1 ¥ 0.0004) to determine the FY 2011 capital Federal rate. As we stated above, because there are no special exceptions payments in FY 2012, we are no longer applying an exceptions payment adjustment factor to the capital Federal rate for FY 2012. However, the exceptions reduction factors were not built permanently into the capital rates; that is, the factors were not applied cumulatively in determining the capital Federal rate. Therefore, we are applying a permanent factor of 1.0004 (1/0.9996) in determining the FY 2012 capital Federal rate to restore the reduction that resulted from the 0.9996 exceptions adjustment factor that was applied in determining the FY 2011 capital Federal rate. 5. Capital Standard Federal Rate for FY 2012 For FY 2011, we established a capital Federal rate of $420.01 (75 FR 50439). We are establishing an update of 1.5 percent in determining the FY 2012 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 1.0 percent reduction to the national capital Federal payment rate in FY 2012 to account for 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 are applying a cumulative documentation and coding adjustment factor of 0.9479 in determining the FY 2012 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 ¥2.9 percent adjustment for FY 2011, plus the ¥1.0 percent adjustment for FY 2012, computed as 1 divided by (1.006 × 1.009 × 1.029 × 1.010). (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 are establishing a national capital Federal rate of $421.42 for FY 2012. The national capital Federal rate for FY 2012 was calculated as follows: • The FY 2012 update factor is 1.015, that is, the update is 1.5 percent. • The FY 2012 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 1.004. • The FY 2012 outlier adjustment factor is 0.9382. • The FY 2012 (special) exceptions payment adjustment factor is 1.0000 because we project that there will be no exceptions payments made in FY 2012 as discussed above in section III.A. of this Addendum. However, we are applying a permanent factor of 1.0004 (1/0.9996) in determining the FY 2012 capital Federal rate to restore the reduction that resulted from the 0.9996 exceptions adjustment factor applied in determining the FY 2011 capital Federal rate. • The cumulative adjustment factor for FY 2012 applied to the national capital Federal rate for changes in documentation and coding under the MS–DRGs is 0.9479. 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 are not making additional adjustments in the capital standard Federal rate for these factors, other than the budget neutrality factor for changes in the MS–DRG 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 2012 affects the computation of the FY 2012 national capital Federal rate in comparison to the FY 2011 national capital Federal rate. The FY 2012 update factor has the effect of increasing the capital Federal rate by 1.5 percent compared to the FY 2011 capital Federal rate. The GAF/ DRG budget neutrality factor of 1.0004 has the effect of increasing the capital Federal rate by 0.04 percent. The FY 2012 outlier adjustment factor has the effect of decreasing the capital Federal rate by 0.23 percent compared to the FY 2011 capital Federal rate. The FY 2012 special exceptions payment adjustment factor to restore the FY 2011 exceptions adjustment factor of 0.9996 has the net effect of increasing the FY 2012 national capital Federal rate by 0.04 percent as compared to the FY 2011 national capital Federal rate. The combined effect of all the changes will increase the national capital Federal rate by approximately 0.34 percent compared to the FY 2011 national capital Federal rate. COMPARISON OF FACTORS AND ADJUSTMENTS: FY 2011 CAPITAL FEDERAL RATE AND FY 2012 CAPITAL FEDERAL RATE mstockstill on DSK4VPTVN1PROD with RULES2 FY 2011 Update Factor 1 ................................................................................................ GAF/DRG Adjustment Factor 1 ........................................................................ Outlier Adjustment Factor 2 .............................................................................. Exceptions Adjustment Factor 3 ....................................................................... MS–DRG Documentation and Coding Adjustment Factor .............................. Capital Federal Rate 7 ...................................................................................... 1.0150 0.9990 0.9404 0.9996 0.9574 4 $420.01 FY 2012 1.0150 1.0004 0.9382 1.0000 0.9479 5 $421.42 Change 1.0150 1.0004 0.9977 1.0004 0.9901 6 1.0034 Percent change 1.50 0.04 ¥0.23 0.04 ¥0.99 0.34 1 The update factor and the GAF/DRG budget neutrality factors are built permanently into the capital rates. Thus, for example, the incremental change from FY 2011 to FY 2012 resulting from the application of the 1.0004 GAF/DRG budget neutrality factor for FY 2012 is a net change of 1.0004. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00330 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 51805 2 The outlier reduction factor is not built permanently into the capital rate; that is, the factor is not applied cumulatively in determining the capital rate. Thus, for example, the net change resulting from the application of the FY 2012 outlier adjustment factor is 0.9382/0.9404, or 0.9977. 3 There are no longer any hospitals eligible to receive special exception adjustments in FY 2012, but since the exceptions payment adjustment is not cumulative, we are restoring the 0.9996 special exceptions adjustment applied to the FY 2011 capital rate. 4 The documentation and coding adjustment factor includes the ¥0.6 percent in FY 2008, ¥0.9 percent in FY 2009, no additional reduction in FY 2010, and the ¥2.9 percent in FY 2011. 5 The documentation and coding adjustment factor includes the ¥0.6 percent in FY 2008, ¥0.9 percent in FY 2009, no additional reduction in FY 2010, the ¥2.9 percent in FY 2011, and the proposed ¥1.0 percent in FY 2012. 6 The change is measured from the FY 2011 cumulative factor of 0.9574. 7 Sum of percent change may not sum due to rounding. In this final rule, we also are providing the following chart that shows how the final FY 2012 capital Federal rate differs from the proposed FY 2012 capital Federal rate as presented in the FY 2012 IPPS/LTCH PPS proposed rule. COMPARISON OF FACTORS AND ADJUSTMENTS: PROPOSED FY 2012 CAPITAL FEDERAL RATE AND FINAL FY 2012 CAPITAL FEDERAL RATE Proposed FY 2012 mstockstill on DSK4VPTVN1PROD with RULES2 Update Factor .............................................................................................................................. GAF/DRG Adjustment Factor ...................................................................................................... Outlier Adjustment Factor ............................................................................................................ Exceptions Adjustment Factor ..................................................................................................... MS–DRG Documentation and Coding Adjustment Factor .......................................................... Capital Federal Rate .................................................................................................................... 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 budget neutrality adjustments for the national GAF and for the Puerto Rico GAF, and the budget neutrality factor for MS–DRG reclassifications and recalibration (which is VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 the same nationally and for Puerto Rico) is discussed above in section III.A.3. of this Addendum. In computing the payment for a particular Puerto Rico hospital, the Puerto Rico portion of the capital rate (25 percent) is multiplied by the Puerto Rico-specific GAF for the labor market area in which the hospital is located, and the national portion of the capital rate (75 percent) is multiplied by the national GAF for the labor market area in which the hospital is located (which is computed from national data for all hospitals in the United States and Puerto Rico). In FY 1998, we implemented a 17.78 percent reduction to the Puerto Rico capital rate as a result of Public Law 105–33. In FY 2003, a small part of that reduction was restored. For FY 2011, the special capital rate for hospitals located in Puerto Rico was $197.66 (75 FR 50441). Consistent with our adjustment to the FY 2011 Puerto Ricospecific standardized amount, under the Secretary’s broad authority under section 1886(g) of the Act, we established an adjustment to the Puerto Rico-specific capital rate of ¥2.6 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. The ¥2.6 percent adjustment to the capital Puerto Rico-specific rate that we made in FY 2011 reflects the entire amount of our current estimate of the effects of 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. Consequently, in this final rule, we are not making any additional adjustments for the effect of documentation and coding that did not reflect real changes in case-mix to the capital Puerto Ricospecific rate for FY 2012. Therefore, with the changes we are making to the other factors used to determine the capital rate, the FY 2012 special capital rate for hospitals in Puerto Rico is $203.86. PO 00000 Frm 00331 Fmt 4701 Sfmt 4700 1.0150 1.0005 0.9406 1.0000 0.9479 $422.54 Final FY 2012 1.0150 1.0004 0.9382 1.0000 0.9479 $421.42 Percent change 0.00 ¥0.01 ¥0.26 0.00 0.00 ¥0.27 B. Calculation of the Inpatient CapitalRelated Prospective Payments for FY 2012 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 2012. For purposes of calculating payments for each discharge during FY 2012, 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 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 2012 are in section II.A. of this Addendum. For FY 2012, 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 $22,385. Currently, as provided in § 412.304(c)(2), we pay a new hospital 85 percent of its reasonable costs during the first 2 years of operation unless it elects to receive payment based on 100 percent of the capital Federal rate. Effective with the third year of operation, we pay the hospital based on 100 percent of the capital Federal rate (that is, the same methodology used to pay all other hospitals subject to the capital PPS). C. Capital Input Price Index 1. Background Like the operating input price index, the capital input price index (CIPI) is a fixedweight price index that measures the price E:\FR\FM\18AUR2.SGM 18AUR2 51806 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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 2012 Based on the latest forecast by IHS Global Insight, Inc. (second quarter of 2011), we are forecasting the FY 2006-based CIPI to increase 1.5 percent in FY 2012. This reflects a projected 1.9 percent increase in vintageweighted depreciation prices (building and fixed equipment, and movable equipment), and a projected 2.0 percent increase in other capital expense prices in FY 2012, partially offset by a projected 1.3 percent decline in vintage-weighted interest expenses in FY 2012. The weighted average of these three factors produces the 1.5 percent increase for the FY 2006-based CIPI as a whole in FY 2012. 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 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 with § 403.752(a), RNHCIs are also subject to the rate-of-increase limits established under § 413.40 of the regulations.) In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26037), we proposed that the FY 2012 rate-of-increase percentage for updating the target amounts for cancer and children’s hospitals and RNHCIs be the estimated percentage increase in the FY 2012 IPPS operating market basket, estimated to be 2.8 percent, in accordance with applicable regulations at § 413.40. We also proposed to use the most recent data available to determine the estimated percentage increase for the FY 2012 IPPS operating market basket. For this final rule, we are using the most recent data available to determine the FY 2012 IPPS operating market basket update. Based on IHS Global Insight, Inc.’s second quarter 2011 forecast, with historical data through the 2011 first quarter, the IPPS operating market basket update is 3.0 percent for FY 2012. Therefore, for cancer and children’s hospitals and RNHCIs, the FY 2012 rate-of-increase percentage that is applied to the FY 2011 target amounts in order to determine the FY 2012 target amount is 3.0 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 2012. The annual updates for the IRF PPS and the IPF PPS are issued by the agency in separate Federal Register documents. We did not receive any public comments on our proposals under this section. V. Changes to the Payment Rate for the LTCH PPS for FY 2012 A. LTCH PPS Standard Federal Rate for FY 2012 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 2012. Under § 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 annually 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 this policy of annually updating PO 00000 Frm 00332 Fmt 4701 Sfmt 4700 the standard Federal rate because, at that time, we believed that was the most appropriate method for updating the LTCH PPS standard Federal rate 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 update as the basis of the annual 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 under § 412.523(c)(3)(iii) that the annual 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. For RY 2008 through FY 2011, we also 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)(vii). Several provisions of the Affordable Care Act revised the annual update to the standard Federal rate, beginning in RY 2010. Specifically, section 1886(m)(3)(A) of the Act, as added by section 3401(c) of the Affordable Care Act, specifies that, for rate year 2010 and each subsequent rate year, any annual update to the standard Federal rate shall be reduced: • For rate year 2010 through 2019, by the other adjustment specified in section 1886(m)(3)(A)(ii) and (m)(4) of the Act; and • For rate year 2012 and each subsequent year, by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act (which we refer to as ‘‘the multifactor productivity (MFP) adjustment’’) as discussed in section VII.E.2.d. of the preamble of this final rule. 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. (As noted in section VII.E.2.d. of the preamble of this final rule, the annual update to the LTCH PPS occurs on October 1 and we have adopted the term ‘‘fiscal year’’ (FY) rather than ‘‘rate year’’ (RY) under the LTCH PPS beginning October 1, 2010. Therefore, for purposes of clarity, when discussing the annual update for the LTCH PPS, including the provisions of the Affordable Care Act, we employ ‘‘fiscal year’’ rather than ‘‘rate year’’ for 2011 and subsequent years.) E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations For FY 2011, consistent with our historical practice, we established an update to the LTCH PPS standard Federal rate based on the full estimated LTCH PPS market basket increase of 2.5 percent, the 0.50 percentage point reduction required by sections 1886(m)(3)(A)(i) and (m)(4)(B) of the Act, 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, at § 412.523(c)(vii) of the regulations, we established an annual update of ¥0.49 percent to the standard Federal rate for FY 2011 (75 FR 50443 through 50444). In this final rule, for FY 2012, as discussed in greater detail in section VII.E.2. of the preamble of this final rule, we are establishing an annual update to the LTCH PPS standard Federal rate of 1.8 percent based on the full estimated increase in the LTCH PPS market basket of 2.9 percent less the MFP adjustment of 1.0 percentage point required under 1886(m)(3)(A)(ii) of the Act and less the 0.1 percentage point required by sections 1886(m)(3)(A)(i) and (m)(4)(C) of the Act. As discussed in greater detail below, for FY 2012, we are not making an adjustment to account for the increase in case-mix in a prior period (FY 2010) resulting from the effect of documentation and coding. 2. Development of the FY 2012 LTCH PPS Standard Federal Rate We continue to believe that the annual 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, including any statutory adjustments. We also continue to 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. Consistent with past LTCH payment policy, we have continued to monitor the most recent available LTCH data. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26038), we stated that, based on an analysis of FY 2010 LTCH claims from the December 2010 update of the MedPAR files, it did not appear that an adjustment for the effect of documentation and coding in FY 2010 was warranted. Therefore, we did not propose to make an adjustment for the effect of documentation and coding during FY 2010 in our proposed annual update to the LTCH PPS standard Federal rate for FY 2012. Furthermore, we proposed that, consistent with our historical practice of using the best available data, if more recent data subsequently became available, we would examine such data for the final rule to determine if an adjustment for the effect of documentation and coding during FY 2010 is warranted. For this final rule, based on an analysis of the most recent available data, that is FY 2010 LTCH claims from the March 2011 update of the MedPAR file, it does not appear that an adjustment for the effect of VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 documentation and coding in FY 2010 is warranted. Therefore, in this final rule, as we proposed, we are not making an adjustment for the effect of documentation and coding during FY 2010 in our annual update to the LTCH PPS standard Federal rate for FY 2012. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50443 through 50444), we established an annual update to the LTCH PPS standard Federal rate for FY 2011 based on the full estimated LTCH PPS market basket increase of 2.5 percent, the 0.50 percentage point reduction required by sections 1886(m)(3)(A)(i), (m)(3)(A)(ii), and (m)(4)(B) of the Act, 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, at § 412.523(c)(vii), we established an annual update to the standard Federal rate for FY 2011 of ¥0.49 percent. That is, we applied an update factor of 0.9951 (calculated as 1.020 × 1 divided by 1.025 = 0.9951 or ¥0.49 percent) 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)) to determine the FY 2011 standard Federal rate. Consequently, we established a standard Federal rate for FY 2011 of $39,599.95, which is applicable to LTCH PPS discharges occurring on or after October 1, 2010, through September 30, 2011. In the FY 2012 IPPS/LTCH PPS proposed rule, for FY 2012, as noted above and as discussed in greater detail in section VII.E.2. of the preamble of the proposed rule, consistent with our historical practice, we proposed to establish an annual update to the LTCH PPS standard Federal rate of 1.5 percent, based on the full estimated increase in the proposed LTCH PPS market basket of 2.8 percent less the proposed MFP adjustment of 1.2 percentage points required under 1886(m)(3)(A)(ii) and less the 0.1 percentage point required by sections 1886(m)(3)(A)(i) and(m)(4)(C) of the Act. Accordingly, we proposed an update factor to the standard Federal rate for FY 2012 of 1.5 percent. That is, under proposed § 412.523(c)(viii), we proposed to apply a factor of 1.015 to the FY 2011 standard Federal rate of $39,599.95 (as established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50444)) to determine the FY 2012 standard Federal rate. Furthermore, as discussed in greater detail in section VII.E.3. of the preamble of the proposed rule, for FY 2012, we proposed to apply an area wage level budget neutrality factor of 0.99723 to the standard Federal rate to ensure that any changes to the area wage level adjustment (that is, the annual update of the wage index values and labor-related share) would not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Consequently, we proposed to establish a standard Federal rate for FY 2012 of $40,082.61 (calculated as $39,599.95 × 1.015 × 0.99723), which would be applicable to LTCH PPS discharges occurring on or after October 1, 2011, through September 30, 2012. Comment: Several commenters expressed general support for the development of the proposed standard Federal rate. In particular, commenters agreed that an adjustment for the PO 00000 Frm 00333 Fmt 4701 Sfmt 4700 51807 effect of documentation and coding during FY 2010 was not warranted. Response: We appreciate the commenters’ support for the development of the proposed standard Federal rate. We are finalizing our proposed approach for the development of the standard Federal rate for FY 2012 (based on the latest available data) without modification in this final rule. In this final rule, for FY 2012, as noted above and as discussed in greater detail in section VII.E.2. of the preamble of the final rule, consistent with our historical practice, we are establishing an annual update to the LTCH PPS standard Federal rate of 1.8 percent, based on the full estimated increase in the LTCH PPS market basket of 2.9 percent less the MFP adjustment of 1.0 percentage point required under section 1886(m)(3)(A)(ii) of the Act and less the 0.1 percentage point required by sections 1886(m)(3)(A)(i) and(m)(4)(C) of the Act. Accordingly, the update factor to the standard Federal rate for FY 2012 is 1.8 percent. That is, under § 412.523(c)(viii), we apply a factor of 1.018 to the FY 2011 standard Federal rate of $39,599.95 (as established in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50444)) to determine the FY 2012 standard Federal rate. Furthermore, as discussed in greater detail in section VII.E.3. of the preamble of this final rule, for FY 2012, we are applying an area wage level budget neutrality factor of 0.99775 to the standard Federal rate to ensure that any changes to the area wage level adjustment (that is, the annual update of the wage index values and labor-related share) will not result in any change (increase or decrease) in estimated aggregate LTCH PPS payments. Consequently, we are establishing a standard Federal rate for FY 2012 of $40,222.05 (calculated as $39,599.95 x 1.018 x 0.99775), which will be applicable to LTCH PPS discharges occurring on or after October 1, 2011, through September 30, 2012. B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 2012 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 area wage index level adjustment. The area wage level 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 LTCH PPS wage index values calculated based on acute care hospital inpatient wage E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51808 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 area wage level 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. Geographic Classifications/Labor Market Area Definitions 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 area wage level adjustment at existing § 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 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, 74 FR 44023 through 44204, and 75 FR 50444 through 50445). As we discussed in the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 26039), in OMB Bulletin No. 10–2, issued on December 1, 2009, OMB announced that the CBSA changes in that bulletin would be the final update prior to the 2010 Census of Population and Housing. We adopted those changes under the LTCH PPS in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50444 through 50445), effective beginning October 1, 2010, and they are also reflected in this FY 2012 final rule. In 2013, OMB plans to announce new area delineations based on its 2010 standards (75 FR 37246) and the 2010 Census data. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 The OMB bulletin is available on the OMB Web site at https://www.whitehouse.gov/OMBgo to ‘‘Agency Information’’ and click on ‘‘Bulletins’’. 3. LTCH PPS Labor-Related Share Under the adjustment for differences in area wage levels at § 412.525(c), the laborrelated 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 currently 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 labor-related share of operating costs and capital costs of the rehabilitation, psychiatric, and long-term care hospital (RPL) market basket based on FY 2002 data, as those were the best available data at that time that reflected the cost structure of LTCHs. For the past 4 years (RY 2008, RY 2009, RY 2010, and FY 2011), we updated the LTCH PPS labor-related share annually based on the latest available data for the FY 2002-based RPL market basket. For FY 2011, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 20445), we established a laborrelated share of 75.271 percent based on the best available data at that time for the FY 2002-based RPL market basket for FY 2011. (Additional background information on the historical development of the labor-related 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).) As discussed in section VII.D. of the preamble of this final rule, we are finalizing our proposal to revise and rebase the market basket used under the LTCH PPS beginning in FY 2012 by adopting the newly created FY 2008-based RPL market basket. We also are finalizing our proposal to determine the labor-related share for FY 2012 as the sum of the FY 2012 relative importance of each labor-related cost category of the FY 2008based RPL market basket. (The summary of comments we received on the proposed LTCH PPS labor-related share for FY 2012 and our responses can be found in section VII.D.3.f. of the preamble of this final rule.) As we discuss in section VII.D.3.f. of the preamble of this final rule, we are establishing a labor-related share under the LTCH PPS for FY 2012 based on IHS Global Insight, Inc.’s second quarter 2011 forecast of the FY 2008-based RPL market basket for FY 2012, as these are the most recent available data that reflect the cost structure of LTCHs. Consistent with our proposal, the laborrelated share for FY 2012 is the sum of the FY 2012 relative importance of each laborrelated cost category of the FY 2008-based RPL market basket, and reflects the different rates of price change for these cost categories between the base year (FY 2008) and FY 2012. As discussed in greater detail in section VII.D.3.f. of this preamble, the sum of PO 00000 Frm 00334 Fmt 4701 Sfmt 4700 the relative importance for FY 2012 for operating costs (Wages and Salaries, Employee Benefits, Professional Fees: LaborRelated, Administrative and Business Support Services, and All-Other: Laborrelated Services) is 66.564 percent and the proposed labor-related share of capital costs is 3.635 percent. Therefore, in this final rule, under the authority set forth in section 123 of the BBRA as amended by section 307(b) of the BIPA, we are establishing a laborrelated share of 70.199 percent (66.564 percent plus 3.635 percent) under the LTCH PPS for the FY 2012, which will be effective for discharges occurring on or after October 1, 2011, and through September 30, 2012. (For additional details on the development of the LTCH PPS labor-related share for FY 2012, we refer readers to section VII.D.3.f. of the preamble of this final rule.) 4. LTCH PPS Wage Index for FY 2012 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 area wage level 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 FY 2011 LTCH PPS final rule (75 FR 50445 through 50446), we calculated the FY 2011 LTCH PPS wage index values using the same data used for the FY 2011 acute care hospital IPPS (that is, data from 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, as these were the most recent complete data available at that time. In that same final rule, we indicated that we computed 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 continued to use our existing policy for determining wage index values in areas where there are no IPPS wage data. Consistent with our historical methodology, to determine the applicable wage index values under the LTCH PPS for FY 2012, 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 proposed to use wage data collected from cost reports submitted by IPPS hospitals for cost reporting periods beginning during FY 2008, without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act. We proposed to use FY 2008 data because these data are the most recent complete data available. These are the same data used to compute the FY 2012 acute care hospital inpatient wage index, as discussed in section III. of the preamble of this final 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44024 through 44025).) The FY 2012 LTCH PPS wage index values we are presenting 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 IPPS wage index policy (that is, our historical policy of not taking into account IPPS geographic reclassifications under sections 1886(d)(8) and 1886(d)(10) of the Act in determining payments under the LTCH PPS). As with the IPPS wage index, 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 (as discussed in section III.F. of the preamble of this final rule). Furthermore, in determining the FY 2012 LTCH PPS wage index values in this final rule, we are continuing 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 final rule (75 FR 50446), we established a methodology for determining 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 are continuing to use this methodology for FY 2012. As was the case in FY 2011, there are currently no LTCHs located in labor areas without IPPS hospital wage data (or IPPS hospitals) for FY 2012. 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. Under our existing 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, and the LTCH PPS wage index value for rural areas with no IPPS wage data is determined by using the unweighted average of the wage indices from all of the CBSAs that are contiguous to the rural counties of the State. (We refer readers to 73 FR 26817 through 26818 for an explanation of and rationale for our policy.) Comment: One commenter pointed out that it is not necessary to use our methodology for determining a LTCH PPS wage index value for areas with no IPPS wage data to determine a LTCH PPS wage index value for the rural area of Massachusetts for FY 2012, as we proposed, because there are, in fact, data for rural Massachusetts (CBSA code 22) in the FY 2008 IPPS wage data that we proposed to use to determine the FY 2012 LTCH PPS wage index values in the proposed rule. Response: We appreciate the commenter pointing out that we mistakenly stated in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26040) that there was no IPPS wage data for the rural area of Massachusetts in the FY 2008 IPPS wage data that we proposed to use to determine the FY 2012 LTCH PPS wage index values. We note that, although our proposal incorrectly stated that we would use our established methodology for rural areas with no IPPS wage data to compute the FY 2012 LTCH PPS wage index for the rural area VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 of Massachusetts, the proposed FY 2012 LTCH PPS wage index for the rural area of Massachusetts (CBSA code 22, as shown in Table 12B of that same proposed rule) was computed based on the proposed FY 2008 IPPS wage data (and was not computed using our policy for rural areas with no IPPS wage data as our proposal indicated). Accordingly, in this final rule, we determined the FY 2012 LTCH PPS wage index value for the rural area of Massachusetts (CBSA code 22) using the FY 2008 IPPS wage data that we are generally using to determine all of the FY 2012 LTCH PPS wage index values in this final rule. Based on the FY 2008 IPPS wage data that we used to determine the FY 2012 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). Consistent with the methodology discussed above and as we proposed, we calculated the FY 2012 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), as shown in Table 12A, which is listed in section VI. of the Addendum to this final rule and available via the Internet). We note that, as IPPS wage data are dynamic, it is possible that urban areas without IPPS wage data will vary in the future. The FY 2012 LTCH wage index values that will be applicable for LTCH discharges occurring on or after October 1, 2011, through September 30, 2012, are presented in Table 12A (for urban areas) and Table 12B (for rural areas), which are listed in section VI. of the Addendum of this final rule and available via the Internet. e. Budget Neutrality Adjustment for Changes to the Area Wage Level Adjustment Historically, the LTCH PPS wage index and labor-related share are updated annually based on the latest available data. However, there are currently no statutory or regulatory requirements that the annual update to the LTCH PPS area wage level adjustment at existing § 412.525(c) (that is, the wage index and the labor-related share) be budget neutral such that estimated aggregate LTCH PPS payments would be unaffected (that is, would be neither greater than nor less than estimated aggregate LTCH PPS payments without such changes). In section VII.E.3. of the preamble of this final rule, as we proposed, under new § 412.525(c)(2), we are providing that, beginning in FY 2012, any changes to the wage index values or laborrelated share will be made in a budget neutral manner such that estimated aggregate LTCH PPS payments are unaffected, that is, will be neither greater than nor less than estimated aggregate LTCH PPS payments without such changes to the area wage level adjustment. Under this policy, as we proposed, we have also determined an area wage level adjustment budget neutrality factor that is applied to the standard Federal rate to ensure that any changes to the area wage level adjustment are budget neutral such that any changes to the wage index values or labor-related share will not result in any change (increase or decrease) in PO 00000 Frm 00335 Fmt 4701 Sfmt 4700 51809 estimated aggregate LTCH PPS payments. Therefore, under § 412.523(d)(4), we are applying an area wage level adjustment budget neutrality factor of 0.99775 (determined under the methodology described in section VII.E.3. of the preamble of this final rule) to determine the FY 2012 LTCH PPS standard Federal rate. (The development of the LTCH PPS standard Federal rate for FY 2012 is discussed in section V.A.2. of this Addendum.) C. 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. Specifically, we apply a COLA to payments to LTCHs located in Alaska and Hawaii by multiplying the nonlabor-related portion of the standard Federal payment rate by the applicable COLA factors established annually by CMS. Higher labor-related costs for LTCHs located in Alaska and Hawaii are taken into account in the adjustment for area wage levels described above. For FY 2011 and in prior years, we used the most recent updated COLA factors obtained from the U.S. Office of Personnel Management (OPM) Web site at https:// www.opm.gov/oca/cola/rates.asp to adjust the payments for LTCHs in Alaska and Hawaii. Sections 1911 through 1919 of the Nonforeign Area Retirement Equity Assurance Act, as contained in subtitle B of title XIX of the National Defense Authorization Act (NDAA) for Fiscal Year 2010 (Pub. L. 111¥84, October 28, 2009) transitions the Alaska and Hawaii COLAs to locality pay. Under section 1914 of Public Law 111–84, locality pay is being phased in over a 3-year period beginning in January 2010 with COLA rates frozen as of the date of enactment, October 28, 2009, and then proportionately reduced to reflect the phasein of locality. As we discussed in the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 26040), we do not believe it is appropriate to use either the 2010 or 2011 reduced factors for adjusting the nonlabor-related portion of the standard Federal rate for LTCHs in Alaska or Hawaii. Therefore, for FY 2012, we proposed to continue to use the same COLA factors (published by OPM) that we used to adjust payments in FY 2011 (which are based on OPM’s 2009 COLA factors) to adjust the nonlabor-related portion of the standard Federal rate for LTCHs located in Alaska and Hawaii, and we invited public comment on this proposal. We believe using these COLA factors would appropriately adjust the nonlabor-related portion of the standard Federal rate for LTCHs in Alaska and Hawaii consistent with § 412.525(b). We did not receive any public comments on this proposal. In this final rule, for FY 2012, 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, as we proposed, we will continue to use the same COLA factors (published by OPM) E:\FR\FM\18AUR2.SGM 18AUR2 51810 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations that we use to adjust LTCH PPS payments in FY 2011. We believe using these COLA factors will appropriately adjust the nonlabor-related portion of the standard Federal rate for LTCHs in Alaska and Hawaii consistent with § 412.525(b). (We note that this policy is consistent with the proposed adjustment for cost-of-living in Alaska and Hawaii for IPPS hospitals discussed in section II.B.2. of this Addendum). Therefore, consistent with our current policy, under § 412.525(b), for FY 2012 we are applying a COLA to payments to LTCHs located in Alaska and Hawaii by multiplying the nonlabor-related portion of the standard Federal payment rate by the factors listed in the chart below because they are the most recent available data at this time. As discussed above, these factors were obtained from the OPM and are also used under the IPPS for FY 2012. COST-OF-LIVING ADJUSTMENT FACTORS FOR ALASKA AND HAWAII HOSPITALS FOR THE LTCH PPS FOR FY 2012 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 ................................................................................................................................ 1.23 1.23 1.23 1.25 1.25 1.18 1.25 1.25 mstockstill on DSK4VPTVN1PROD with RULES2 (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.) D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases 1. Background Under the broad authority conferred upon the Secretary by section 123 of the BBRA as amended by section 307(b) of BIPA, in the regulations at § 412.525(a), we established an adjustment for additional payments for outlier cases that have extraordinarily high costs relative to the costs of most discharges. We refer to these cases as high cost outliers (HCOs). Providing additional payments for outliers strongly improves the accuracy of the LTCH PPS in determining resource costs at the patient and hospital level. These additional payments reduce the financial losses that would otherwise be incurred when treating patients who require more costly care and, therefore, reduce the incentives to underserve these patients. We set the outlier threshold before the beginning of the applicable rate year so that total estimated outlier payments are projected to equal 8 percent of total estimated payments under the LTCH PPS. 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 make an additional payment to an HCO case that is equal to 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 (adjusted MS–LTC–DRG payment plus the fixed-loss amount). The fixed percentage of costs is called the marginal cost VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 factor. We calculate the estimated cost of a case by multiplying the Medicare allowable covered charge by the hospital’s overall hospital cost-to-charge ratio (CCR). Under the LTCH PPS HCO policy at § 412.525(a), 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. 2. Determining LTCH CCRs Under the LTCH PPS a. Background The following is a discussion of CCRs that are used in determining payments for HCO and SSO cases under the LTCH PPS, at § 412.525(a) and § 412.529, respectively. Although this section is specific to HCO cases, because CCRs and the policies and methodologies pertaining to them are used in determining payments for both HCO and SSO cases (to determine the estimated cost of the case at § 412.529(d)(2)), we are discussing the determination of CCRs under the LTCH PPS for both of these 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 PO 00000 Frm 00336 Fmt 4701 Sfmt 4700 § 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 accordance with § 412.525(a)(4)(iv)(C)(2) for HCOs and § 412.529(f)(4)(iii)(B) for SSOs, in the proposed rule, using our established methodology for determining the LTCH total CCR ceiling (described above), based on IPPS total CCR data from the December 2010 update of the PSF, we proposed to establish E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations a total CCR ceiling of 1.210 under the LTCH PPS that would be effective for discharges occurring on or after October 1, 2011, through September 30, 2012. Consistent with our historical policy of using the best available data, we also proposed that if more recent data became available, we would use such data to establish a total CCR ceiling for FY 2012 in the final rule. Consistent with that proposal, in accordance with § 412.525(a)(4)(iv)(C)(2) for HCOs and § 412.529(f)(4)(iii)(B) for SSOs, in this final rule, using our established methodology for determining the LTCH total CCR ceiling (described above), based on IPPS total CCR data from the March 2011 update of the PSF, we are establishing a total CCR ceiling of 1.215 under the LTCH PPS that will be effective for discharges occurring on or after October 1, 2011, through September 30, 2012. 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 the proposed rule, using our established methodology for determining the LTCH statewide average CCRs, based on the most recent complete IPPS total CCR data from the December 2010 update of the PSF, we proposed LTCH PPS statewide average total CCRs for urban and rural hospitals that would be effective for discharges occurring on or after October 1, 2011, through September 30, 2012, in Table 8C which is listed in section VI. of the Addendum to that proposed rule and available via the Internet. Consistent with our historical practice of using the best available data, in this final rule, using our established methodology for determining the LTCH statewide average CCRs, based on the most recent complete IPPS total CCR data from the March 2011 update of the PSF, we are establishing LTCH PPS statewide average total CCRs for urban VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 and rural hospitals that will be effective for discharges occurring on or after October 1, 2011, through September 30, 2012, in Table 8C which is listed in section VI. of the Addendum to this final rule and available via the Internet. As we explained in the proposed rule (76 FR 26042), all areas in the District of Columbia, New Jersey, and Rhode Island are classified as urban. Therefore, there are no rural statewide average total CCRs listed for those jurisdictions in Table 8C listed in section VI. of the Addendum to this final rule and available via the Internet. 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 North Dakota 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 2011. Therefore, there is no rural statewide average total CCR listed for rural North Dakota in Table 8C listed in section VI. of the Addendum to this final rule and available via the Internet. In addition, consistent with our existing methodology and as we proposed, in determining the urban and rural statewide average total CCRs for Maryland LTCHs paid under the LTCH PPS, in this final rule, we used, as a proxy, the national average total CCR for urban IPPS hospitals and the national average total CCR for rural IPPS hospitals, respectively. We used 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 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 cost-to-charge data computed from the relevant cost report determined at the time the cost report coinciding with the discharge is settled. For additional information, we refer readers to sections 150.26 through 150.28 of the Medicare Claims Processing Manual (Pub. 100–4) as added by Change Request 7192 (Transmittal 2111; December 3, 2010) and the RY 2009 LTCH PPS final rule (73 FR 26820 through 26821). 3. Establishment of the LTCH PPS Fixed-Loss Amount for FY 2012 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 PO 00000 Frm 00337 Fmt 4701 Sfmt 4700 51811 payments and total LTCH PPS payments for each case using claims data from the MedPAR files. Specifically, to determine the outlier payment for each case, we estimate the cost of the case by multiplying the Medicare covered charges from the claim by the LTCH’s CCR. Under § 412.525(a)(3) (in conjunction with § 412.503), if the estimated cost of the case exceeds the outlier threshold, we make an outlier payment equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (that is, the sum of the adjusted Federal prospective payment for the MS– LTC–DRG and the fixed-loss amount). In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26042), we proposed to continue to use our existing methodology to calculate the fixed-loss amount for FY 2012 (based on data and the 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. Consistent with our historical practice of using the best data available, in determining the fixed-loss amount for FY 2012, we used the most recent available LTCH claims data and CCR data at this time. Specifically, for the proposed rule, we used LTCH claims data from the December 2010 update of the FY 2010 MedPAR file and CCRs from the December 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 2012 because these data were the most recent complete LTCH data available at that time. We also proposed to determine the FY 2012 fixed-loss amount based on the proposed MS–LTC– DRG classifications and proposed relative weights from the version of the GROUPER that would be in effect as of the beginning of FY 2012, that is, Version 29.0 of the GROUPER. In that same proposed rule, 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 $19,270 for FY 2012. Thus, we proposed to make an additional payment to an HCO case that is equal to 80 percent of the difference between the estimated cost of the case and the proposed outlier threshold (the sum of the adjusted proposed Federal LTCH payment for the proposed MS–LTC–DRG and the proposed fixed-loss amount of $19.270). In this final rule, as we proposed, we are continuing to use our existing methodology to calculate the fixed-loss amount for FY 2012 (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 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 fixed-loss amount for FY 2012, we used the most recent available LTCH claims data and CCR data at this time. Specifically, for this final rule, we used LTCH claims data from the March 2011 update of the FY 2010 MedPAR file and E:\FR\FM\18AUR2.SGM 18AUR2 51812 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations CCRs from the March 2011 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 2012 because these data are the most recent complete LTCH data currently available. Furthermore, we determined the FY 2012 fixed-loss amount based on the MS–LTC–DRG classifications and relative weights from the version of the GROUPER that is in effect as of the beginning of FY 2012, that is, Version 29.0 of the GROUPER. Under the broad authority of section 123(a)(1) of the BBRA and section 307(b)(1) of BIPA, we are establishing a fixed-loss amount of $17,931 for FY 2012. Thus, we will make an additional payment to an HCO case that is equal to 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 $17.931). We also note that the fixed-loss amount of $17,931 for FY 2012 is lower than the FY 2011 fixed-loss amount of $18,785, and is also somewhat lower than the proposed FY 2012 fixed-loss amount of $19,270 (which was determined using LTCH claims data from the December 2010 update of the FY 2010 MedPAR file and CCRs from the December 2010 update of the PSF because these data were the most recent complete data available at that time). Based on our payment simulations using the most recent available data at this time, the decrease in the fixed-loss amount for FY 2012 is necessary to maintain the existing requirement that estimated outlier payments would equal 8 percent of estimated total LTCH PPS payments. (For further information on the existing 8 percent HCO ‘‘target’’ requirement, 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 less than the current regulatory 8percent requirement because a higher fixed- loss amount would result in fewer cases qualifying as outlier cases. In addition, maintaining the higher fixed-loss amount would result in a decrease in the amount of the additional payment for an HCO case because the maximum loss that a LTCH must incur before receiving an HCO payment (that is, the fixed-loss amount) would be larger. For these reasons, we believe that lowering the fixed-loss amount is appropriate and necessary to maintain that estimated outlier payments would equal 8 percent of estimated total LTCH PPS payments as required under § 412.525(a). 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 estimated 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 2012, the HCO payment would be 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the fixedloss amount of $17,931 and the amount paid under the SSO policy as specified in § 412.529). E. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 2012 Section 412.525 sets forth the adjustments to the LTCH PPS standard Federal rate. Under § 412.525(c), 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 listed in section VI. of the Addendum of this final rule and available via the Internet). The standard Federal rate is also adjusted to account for the higher costs of hospitals in Alaska and Hawaii by multiplying the nonlabor-related portion 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 accordance with § 412.525(b). In this final rule, we are establishing a standard Federal rate for FY 2012 of $40,222.05, as discussed above in section V.A.2. of the Addendum of this final rule. We illustrate the methodology to adjust the LTCH PPS Federal rate for FY 2012 in the following example: Example: During FY 2012, a Medicare patient is in a LTCH located in Chicago, Illinois (CBSA 16974). The FY 2012 LTCH PPS wage index value for CBSA 16974 is 1.0600 (Table 12A listed in section VI. of the Addendum of this final rule and available via the Internet). The Medicare patient is classified into proposed MS–LTC–DRG 28 (Spinal Procedures with MCC), which has a relative weight for FY 2012 of 1.7420 (Table 11 listed in section VI. of the Addendum of this final rule and available via the Internet). To calculate the LTCH’s total adjusted Federal prospective payment for this Medicare patient in FY 2012, we computed the wage-adjusted Federal prospective payment amount by multiplying the unadjusted standard Federal rate ($40,222.05) by the labor-related share (70.199 percent) and the wage index value (1.0600). This wage-adjusted amount is then added to the nonlabor-related portion of the unadjusted standard Federal rate (29.801 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 (1.7420) to calculate the total adjusted Federal LTCH PPS prospective payment for FY 2012 ($73,017.99). The table below illustrates the components of the calculations in this example. $40,222.05 × 0.70199 Labor-Related Portion of the Federal Rate .................................................................................................................................. Wage Index (CBSA 16974) ........................................................................................................................................................... = $28,235.48 × 1.0600 Wage-Adjusted Labor Share of Federal Rate .............................................................................................................................. Nonlabor-Related Portion of the Federal Rate ($40,222.08 × 0.29801) ..................................................................................... = $29,929.61 + $11,986.57 Adjusted Federal Rate Amount ................................................................................................................................................... MS–LTC–DRG 28 Relative Weight .............................................................................................................................................. = $41,916.18 × 1.7420 Total Adjusted Federal Prospective Payment ............................................................................................................................. mstockstill on DSK4VPTVN1PROD with RULES2 Unadjusted Standard Federal Prospective Payment Rate .......................................................................................................... Labor-Related Share ..................................................................................................................................................................... = $73,017.99 VI. Tables Referenced in This Final Rule and Available Only Through the Internet on the CMS Web Site This section lists the tables referred to throughout the preamble of this final rule and in this Addendum. In the past, a majority of these tables were published in the Federal Register as part of the annual proposed and final rules. However, beginning in FY 2012, IPPS tables 2, 3A, 3B, 4A, 4B, 4C, 4D, 4E, 4F, 4J, 5, 6A, 6B, 6C, 6D, 6E, 6F, 7A, 7B, 8A, 8B, VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 9A, 9C, and 10, and LTCH PPS tables 8C, 11, 12A, and 12B will no longer be published as part of the annual IPPS/LTCH PPS proposed and final rulemakings. Instead, these tables, along with new LTCH PPS tables 13A and 13B, and new IPPS table 14 will be available only through the Internet. IPPS tables 1A, 1B, 1C, and 1D, and LTCH PPS table 1E, displayed at the end of this section, will continue to be published in the Federal Register as part of the annual proposed and PO 00000 Frm 00338 Fmt 4701 Sfmt 4700 final rules. We note that previously tables 6G, 6H, 6I, 6I.1, 6I.2, 6J, 6J.1, 6J.2, and 6K were already made available only through the Internet. We will continue to post these tables through the Internet. Readers who experience any problems accessing any of the tables that are posted on the CMS Web sites identified below should contact Ing Jye Cheng at (410) 786–4548. The following IPPS tables for this FY 2012 final rule are available only through the E:\FR\FM\18AUR2.SGM 18AUR2 51813 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Internet on the CMS Web site at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ 01_overview.asp. Click on the link on the left side of the screen titled, ‘‘FY 2012 IPPS Final Rule Home Page’’ or ‘‘Acute Inpatient—Files for Download’’. Table 2.—Acute Care Hospitals Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2010; Hospital Wage Indexes for Federal Fiscal Year 2012; Hospital Average Hourly Wages for Federal Fiscal Years 2010 (2006 Wage Data), 2011 (2007 Wage Data), and 2012 (2008 Wage Data); and 3–Year Average of Hospital Average Hourly Wages Table 3A.—FY 2012 and 3-Year Average Hourly Wage for Acute Care Hospitals in Urban Areas by CBSA Table 3B.—FY 2012 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 2012 Table 4B.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State—FY 2012 Table 4C.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by State—FY 2012 Table 4D.—States Designated as Frontier, with Acute Care Hospitals Receiving at a Minimum the Frontier State Floor Wage Index1; Urban Areas with Acute Care Hospitals Receiving the Statewide Rural Floor Wage Index—FY 2012 Table 4E.—Urban CBSAs and Constituent Counties for Acute Care Hospitals—FY 2012 Table 4F.—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals by CBSA—FY 2012 Table 4J.—Out-Migration Adjustment for Acute Care Hospitals—FY 2012 Table 5.—List of Medicare Severity Diagnosis-Related Groups (MS–DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay—FY 2012 Table 6A.—New Diagnosis Codes—FY 2012 Table 6B.—New Procedure Codes—FY 2012 Table 6C.—Invalid Diagnosis Codes—FY 2012 Table 6D.—Invalid Procedure Codes—FY 2012 Table 6E.—Revised Diagnosis Code Titles—FY 2012 Table 6F.—Revised Procedure Code Titles—FY 2012 Table 6G.—Additions to the CC Exclusions List—FY 2012 Table 6H.—Deletions from the CC Exclusions List—FY 2012 Table 6I.—Complete MCC List—FY 2012 Table 6I.1.—Additions to the MCC List— FY 2012 Table 6I.2.—Deletions to the MCC List—FY 2012 Table 6J.—Complete CC List—FY 2012 Table 6J.1.—Additions to the CC List—FY 2012 Table 6J.2.—Deletions to the CC List—FY 2012 Table 6K.—Complete List of CC Exclusions—FY 2012 Table 7A.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2010 MedPAR Update—March 2011 GROUPER V28.0 MS–DRGs Table 7B.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2010 MedPAR Update—March 2011 GROUPER V29.0 MS–DRGs Table 8A.—FY 2012 Statewide Average Operating Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural) Table 8B.—FY 2012 Statewide Average Capital Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals Table 9A.—Hospital Reclassifications and Redesignations—FY 2012 Table 9C.—Hospitals Redesignated as Rural under Section 1886(d)(8)(E) of the Act—FY 2012 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) Table 14.—List of Hospitals with Fewer than 1,600 Medicare Discharges Based on the March 2011 Update of the FY 2010 MedPAR File and Their FY 2012 Low-Volume Payment Adjustment The following LTCH PPS tables for this FY 2012 final rule are available only through the Internet on the CMS Web site at https:// www.cms.gov/LongTermCareHospitalPPS/ LTCHPPSRN/list.asp under the list item for Regulation Number CMS–1518–P. Table 8C.—FY 2012 Statewide Average Total Cost-to-Charge Ratios (CCRs) for LTCHs (Urban and Rural) Table 11.—MS–LTC–DRGs, Relative Weights, Geometric Average Length of Stay, and Short-Stay Outlier (SSO) Threshold for Discharges Occurring from October 1, 2011 through September 30, 2012 under the LTCH PPS Table 12A.—LTCH PPS Wage Index for Urban Areas for Discharges Occurring from October 1, 2011 through September 30, 2012 Table 12B.—LTCH PPS Wage Index for Rural Areas for Discharges Occurring From October 1, 2011 through September 20, 2012 Table 13A.—Composition of Low-Volume Quintiles for MS–LTC–DRGs—FY 2012 Table 13B.—No-Volume MS–LTC–DRG Crosswalk for FY 2012 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)—FY 2012 Full update (1.90 percent) Reduced update (¥0.10 percent) Labor-related Nonlabor-related Labor-related Nonlabor-related $3,584.30 $1,625.44 $3,513.95 $1,593.54 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)—FY 2012 Full update (1.90 percent) Reduced update (¥0.10 percent) Labor-related Nonlabor-related Labor-related Nonlabor-related $3,230.04 $1,979.70 $3,166.64 $1,940.85 mstockstill on DSK4VPTVN1PROD with RULES2 TABLE 1C—ADJUSTED OPERATING STANDARDIZED AMOUNTS FOR PUERTO RICO, LABOR/NONLABOR—FY 2012 Rates if wage index is greater than 1 Rates if wage index is less than or equal to 1 Labor National ............................................................................................ Puerto Rico ...................................................................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00339 Fmt 4701 Nonlabor Labor Nonlabor $3,584.30 1,553.29 $1,625.44 947.98 $3,230.04 1,550.79 $1,979.70 950.48 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 51814 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations TABLE 1D—CAPITAL STANDARD FEDERAL PAYMENT RATE—FY 2012 Rate National ..................................... Puerto Rico ............................... $421.42 203.86 TABLE 1E—LTCH STANDARD FEDERAL PROSPECTIVE PAYMENT RATE—FY 2012 Rate Standard Federal Rate ............. $40,222.05 Appendix A: Economic Analyses mstockstill on DSK4VPTVN1PROD with RULES2 I. Regulatory Impact Analysis A. Introduction We have examined the impacts of this final rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2011) the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96– 354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995, Pub. L. 104–4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)). Executive Orders 12866 and 13563 direct 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). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. 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 changes for FY 2012 acute care hospital operating and capital payments will redistribute amounts in excess of $100 million among different types of inpatient cases. The applicable percentage increase to the IPPS rates required by the statute, in conjunction with other payment changes in this final rule, will result in an estimated $1.13 billion increase in FY 2012 operating payments (or 1.1 percent change) and an estimated $151 million increase in FY 2012 capital payments (or 1.8 percent change). The impact analysis of the capital payments can be found in section I.I. of this Appendix. In addition, as described in section I.J. of this Appendix, LTCHs are expected to experience a change in payments by $126 million (or 2.5 percent). Our operating impact estimate includes the ¥2.0 percent documentation and coding adjustment applied to the hospital-specific rates and to the IPPS standardized amounts. In addition, our operating impact estimate VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 includes the 1.9 percent hospital update to the standardized amount (which includes the 3.0 percent market basket update with the reduction of 1.0 percentage point for the multifactor productivity adjustment and the 0.1 percentage point reduction required under the Affordable Care Act). Finally, our operating impact estimate includes the 1.1 percent update to the standardized amount and the 0.9 percent update to the hospitalspecific rates in light of DC Circuit’s decision in Cape Cod v. Sebelius (630 F.3d 203 (DC Cir. 2011)). 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 analysis in this Appendix, in conjunction with the remainder of this document, demonstrates that this final rule is consistent with the regulatory philosophy and principles identified in Executive Orders 12866 and 13563, the RFA, and section 1102(b) of the Act. The final rule will affect payments to a substantial number of small rural hospitals, as well as other classes of hospitals, and the effects on some hospitals may be significant. B. Need This final rule is necessary in order to make payment and policy changes under the Medicare IPPS for Medicare acute care hospital inpatient services for operating and capital-related costs as well as for certain hospitals and hospital units excluded from the IPPS. This final rule also is necessary to make payment and policy changes for Medicare hospitals under the LTCH PPS payment system. C. 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 will 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 changes will ensure that the outcomes of the prospective payment systems are reasonable and equitable while avoiding or minimizing unintended adverse consequences. D. Limitations of Our Analysis The following quantitative analysis presents the projected effects of our policy changes, as well as statutory changes effective for FY 2012, on various hospital groups. We estimate the effects of individual policy changes by estimating payments per case while holding all other payment policies constant. We use the best data available, but, generally, we do not attempt to make adjustments for future changes in such variables as admissions, lengths of stay, or case-mix. PO 00000 Frm 00340 Fmt 4701 Sfmt 4700 E. 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 32 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 July 2011, there are 3,423 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 1,346 CAHs. These small, limited service hospitals are paid on the basis of reasonable costs rather than under the IPPS. (We refer readers to section I.H.15. of this Appendix for a further description of the impact of CAH-related policy changes.) There are also 1,290 IPPS-excluded hospitals and 2,119 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 IPPSexcluded hospitals and units are not included in this final rule. The impact of the update and policy changes to the LTCH PPS for FY 2012 is discussed in section I.J. of this Appendix. F. Effects on Hospitals and Hospital Units Excluded From the IPPS As of July 2011, there were 3,409 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, 235 rehabilitation hospitals and 940 rehabilitation units, and 437 LTCHs, are paid the Federal prospective per discharge rate under the IRF PPS and the LTCH PPS, respectively, and 512 psychiatric hospitals and 1,179 psychiatric units are paid the Federal per diem amount under the IPF PPS. As stated above, IRFs and IPFs are not affected by the rate updates discussed in this final rule. The impacts of the changes to LTCHs are discussed in section I.J. 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 2012. For these hospitals (cancer and children’s hospitals), consistent with the authority provided in section 1886(b)(3)(B)(ii) of the Act, the update is the FY 2012 percentage increase in the IPPS E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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 2011 second quarter forecast, with historical data through the 2011 first quarter, we are estimating that the FY 2012 update based on the IPPS operating market basket is 3.0 percent (that is, the current estimate of the market basket rate-of-increase). However, the Affordable Care Act requires an adjustment for multifactor productivity (currently estimated to be 1.0 percentage point) and a 0.1 percentage point reduction to the market basket update resulting in a 1.9 percent applicable percentage increase for IPPS hospitals. RNCHIs, children’s hospitals and cancer hospitals are not subject to the reductions 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 update is the same as for children’s and cancer hospitals, which is the percentage increase in the FY 2012 IPPS operating market basket, estimated at 3.0 percent, without the reductions required under the Affordable Care Act. The impact of the update in the rate-ofincrease 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. G. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs 1. Basis and Methodology of Estimates In this final rule, we are announcing policy changes and payment rate updates for the IPPS for FY 2012 for operating costs of acute care hospitals. FY 2012 updates to the capital payments to acute care hospitals are discussed in section I.I. of this Appendix. Based on the overall percentage change in payments per case estimated using our payment simulation model, we estimate that total FY 2012 operating payments will increase by 1.1 percent compared to FY 2011, VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 largely due to the documentation and coding adjustments and the applicable percentage increase applied to the IPPS rates. In addition to the applicable percentage increase, this amount reflects the FY 2012 adjustments for documentation and coding and recoupment described in section II.D. of the preamble of this final rule: ¥ 2.0 percent for the IPPS national standardized amounts and the IPPS hospital-specific rates. 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 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 changes for which we do not have data available that would allow us to estimate the payment impacts using this model. For those 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 2010 MedPAR file and the most current Provider-Specific File (PSF) that is used for payment purposes. Although the analyses of the 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 2010 MedPAR file, we simulated payments under the operating IPPS given various combinations of payment parameters. As described above, 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 2012 are discussed in section I.I. of this Appendix. We discuss the following changes below: • Effects of the application of the documentation and coding adjustment and applicable percentage increase (including the market basket update, the multifactor productivity adjustment and the applicable percentage reduction in accordance with the Affordable Care Act) to the standardized amount and hospital-specific rates. PO 00000 Frm 00341 Fmt 4701 Sfmt 4700 51815 • Effects of the increase to the standardized amount and hospital-specific rates in light of D.C. Circuit’s decision in Cape Cod v. Sebelius, 630 F.3d 203 (DC Cir. 2011). • 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 data from hospitals’ cost reporting periods beginning during FY 2008, compared to the FY 2007 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 the geographic reclassifications by the MGCRB that will be effective in FY 2012. • The effects of the rural floor and imputed floor with the application of the national budget neutrality factor applied to the wage index, as required by the Affordable Care Act. • The effects of the frontier State 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 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 2012 policies relative to payments based on FY 2011 policies that include the applicable percentage increase of 1.9 percent (or 3.0 percent market basket update with a reduction of 1.0 percentage point for the multifactor productivity adjustment, and a 0.1 percentage point reduction, as required under the Affordable Care Act). To illustrate the impact of the FY 2012 changes, our analysis begins with a FY 2011 baseline simulation model using: The FY 2012 applicable percentage increase of 1.9 percent and the documentation and coding adjustment of ¥2.0 percent; the FY 2011 MS–DRG GROUPER (Version 28.0); the most current CBSA designations for hospitals based on OMB’s MSA definitions; the FY 2011 wage index; and no MGCRB reclassifications. Outlier payments are set at 5.1 percent of total operating MS–DRG and outlier payments for modeling purposes. 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 include a reduction of 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51816 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations regard to section 1886(b)(3)(B)(ix), (xi), or (xii) of the Act.) At the time that this impact was prepared, 57 hospitals did not receive the full market basket rate-of-increase for FY 2011 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 2012 using a reduced update for these 57 hospitals. However, we do not have enough information at this time to determine which hospitals will not receive the full update factor for FY 2012. Each policy change, statutory or otherwise, is then added incrementally to this baseline, finally arriving at an FY 2012 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 2011 to FY 2012. 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 2012 using an applicable percentage increase of 1.9 percent. This includes our forecasted IPPS operating hospital market basket increase of 3.0 percent with a reduction of 1.0 percentage point for the multifactor productivity adjustment and a 0.1 percentage point reduction as required under the Affordable Care Act. (Hospitals that fail to comply with the quality data submission requirements will receive an update of ¥0.1 percent (this update includes the 2.0 percentage point reduction for failure to submit these data)). Under section 1886(b)(3)(B)(iv) of the Act, the updates to the hospital-specific amounts for SCHs and for MDHs are also equal to the applicable percentage increase, or 1.9 percent. In addition, we are updating the Puerto Ricospecific amount by an applicable percentage increase of 1.9 percent. A second significant factor that affects the changes in hospitals’ payments per case from FY 2011 to FY 2012 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 2011 that are no longer reclassified in FY 2012. Conversely, payments may increase for hospitals not reclassified in FY 2011 that are reclassified in FY 2012. A third significant factor is that we currently estimate that actual outlier payments during FY 2011 will be 4.8 percent of total MS–DRG payments. Our updated FY 2011 outlier estimate accounts for changes to the FY 2011 IPPS payments required under the Affordable Care Act. When the FY 2011 final rule was published, we projected FY 2011 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 2011 (as discussed in the Addendum to this final rule) are reflected in the analyses below comparing our current estimates of FY 2011 payments per case to estimated FY 2012 payments per case (with outlier payments VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 projected to equal 5.1 percent of total MS–DRG payments). Comment: One commenter noted that in examining the IPPS Impact File associated with the FY 2012 IPPS/LTCH PPS proposed rule posted on the CMS Web site, it found that approximately 27,000 claims were included in the calculation of the case-mix index and case counts (fields such as BILLS, TACMIV29, and CASETA29) which may be Medicare Advantage (MA) patient claims submitted by teaching hospitals in order to receive their IME payments. These claims only had an IME payments listed. The commenter stated that if these claims are MA claims, they are not eligible for outlier payments under the IPPS and, as agreed by CMS, must not be included as part of the calculation of the outlier thresholds or be included in the statistics posted in the IPPS Impact File. Accordingly, the commenter requested that CMS review these 27,000 ‘‘IME only’’ claims to determine whether they represent MA claims. Response: We have reviewed our MedPAR claims file used to calculate outlier thresholds and used to report hospital case counts and case-mix values and have determined that there are MA claims that may be submitted by teaching hospitals that do not have a GHO Paid indicator with a value of 1,’’ which is the indicator for MA claims. However, we can identify those claims as likely to be MA claims because the IME payment field is equal to the DRG payment field. We agree with the commenter that MA claims submitted by teaching hospitals for the purpose of the IME payment should not be included in the calculation of the outlier threshold and have excluded those 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 field equal to the DRGPAY field because these are probably MA claims that are likely not paid under the IPPS and therefore would not incur an outlier payment. Claims that are trimmed using the criteria discussed above are not part of the calculation of the outlier threshold, hospital case count or fee-forservice case mix values reported on the IPPS Impact File in this final rule. Comment: One commenter requested that CMS provide a table indicating the State-byState impact of the rural floor provision for providers in each State, including a schedule of what the area wage indexes would be if the rural floor was not applied. The commenter also suggested that CMS publish this information annually. Response: In this final rule, we are including in this impact section a table indicating State level impacts of the rural floor and imputed floor provision. Also, we are revising Table 4D of the Addendum, which specifies the wage index for States or urban areas receiving the frontier State wage index or rural and imputed floors, to include a column indicating the pre-floor area wage index. 2. Analysis of Table I Table I displays the results of our analysis of the changes for FY 2012. The table categorizes hospitals by various geographic PO 00000 Frm 00342 Fmt 4701 Sfmt 4700 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 3,423 acute care hospitals included in the analysis. The next four rows of Table I contain hospitals categorized according to their geographic location: all urban, which is further divided into large urban and other urban; and rural. There are 2,498 hospitals located in urban areas included in our analysis. Among these, there are 1,371 hospitals located in large urban areas (populations over 1 million), and 1,127 hospitals in other urban areas (populations of 1 million or fewer). In addition, there are 925 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 2012 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 2,519; 1,384; 1,135; and 904, 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 2,391 nonteaching hospitals in our analysis, 792 teaching hospitals with fewer than 100 residents, and 240 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 175 RRCs, 320 SCHs, 193 MDHs, and 120 hospitals that are both SCHs and RRCs, and 18 hospitals that are both MDHs and RRCs. 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 2012. The second grouping shows the MGCRB rural reclassifications. The final category shows the impact of the policy changes on the 19 cardiac hospitals. BILLING CODE 4120–01–P E:\FR\FM\18AUR2.SGM 18AUR2 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00343 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 51817 ER18AU11.023</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations VerDate Mar<15>2010 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00344 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.024</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51818 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00345 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 51819 ER18AU11.025</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations VerDate Mar<15>2010 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00346 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.026</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51820 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00347 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 51821 ER18AU11.027</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations BILLING CODE 4120–01–C a. Effects of the Hospital Update and Documentation and Coding Adjustment (Column 2) As discussed in section II.D. of the preamble of this final rule, this column includes the hospital update, including the 3.0 percent market basket update, the reduction of 1.0 percentage point for the multifactor productivity adjustment, and the 0.1 percentage point reduction in accordance with the Affordable Care Act. In addition, this column includes the FY 2012 documentation and coding adjustment of ¥2.0 percent on the national standardized amount and the hospital-specific rates. As a result, we are applying a ¥0.1 percent adjustment to the national standardized amount and the hospital specific rate. Overall, hospitals will experience a ¥0.1 percent decrease in payments due to the effects of the hospital update and documentation and coding adjustment on the national standardized amount. Puerto Rico hospitals will experience a 0.3 percent increase in payments because we are not making any documentation and coding adjustment to the Puerto Rico-specific rate, which is 25 percent of Puerto Rico’s payment rate. mstockstill on DSK4VPTVN1PROD with RULES2 b. Effects of the Adjustment to the Standardized Amount for Cape Cod Hospital v. Sebelius (Column 3) Column 3 shows the impact of the 1.1 percent adjustment to the national standardized amount and the 0.9 percent adjustment to the hospital-specific rate in light of the decision in Cape Cod Hospital v. Sebelius, as discussed in section II. of the Addendum to this final rule. Overall, hospitals will experience a 1.1 percent increase in payments due to the effects of the adjustment on the national standardized amount. Hospital categories that experience less than a 1.1 percent increase in payments include hospitals that are paid under the hospital-specific rate, which we are increasing by 0.9 percent. Rural hospitals will experience a 1.0 percent increase in payments because many rural hospitals are paid under the hospital-specific rate, which we are increasing by 0.9 percent. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 c. Effects of the Changes to the MS–DRG Reclassifications and Relative Cost-Based Weights With Recalibration Budget Neutrality (Column 4) Column 4 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. 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. 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. As discussed in section II.E. of the preamble of this rule, the FY 2012 MS–DRG relative weights will be 100 percent costbased and 100 percent MS–DRGs. For FY 2012, the MS–DRGs are calculated using the FY 2010 MedPAR data grouped to the Version 29.0 (FY 2012) 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 the preamble of this final rule. The ‘‘All Hospitals’’ line in Column 4 indicates that changes due to MS–DRGs and relative weights will result in a 0.0 percent change in payments with the application of the recalibration budget neutrality factor of 0.997903 on to the standardized amount. Due to changes to the MS–DRG GROUPER in this final rule, there were some shifts in payments due to changes in the relative weights with rural hospitals experiencing a 0.2 percent decrease in payments and large urban hospitals experiencing a 0.1 percent increase in payments. d. Effects of Wage Index Changes (Column 5) Column 5 shows the impact of updated wage data with the application of the wage budget neutrality factor. 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 2012 is based on data submitted for hospital cost reporting periods beginning on or after October 1, 2007 and before October 1, 2008. The estimated impact of the updated wage data and labor share on hospital payments is isolated in Column 5 by PO 00000 Frm 00348 Fmt 4701 Sfmt 4700 holding the other payment parameters constant in this simulation. That is, Column 5 shows the percentage change in payments when going from a model using the FY 2011 wage index, based on FY 2007 wage data, the current labor-related share and having a 100percent occupational mix adjustment applied, to a model using the FY 2012 prereclassification wage index with the laborrelated share, also having a 100-percent occupational mix adjustment applied, based on FY 2008 wage data (while holding other payment parameters such as use of the Version 29.0 MS–DRG GROUPER constant). The occupational mix adjustment is based on the 2007–2008 occupational mix survey. In addition, the column shows the impact of the application of wage budget neutrality to the national standardized amount. 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 guaranteed under section 1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2012, 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. The wage budget neutrality factor is 1.000558, and the overall payment change is 0 percent. Column 5 shows the impacts of updating the wage data using FY 2008 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 0.7 percent increase due to increases in the wage index among rural Connecticut and rural Massachusetts hospitals. The largest decline from updating the wage data is seen in the rural East South Central region (–0.5 percent decrease). In looking at the wage data itself, the national average hourly wage increased 3.7 percent compared to FY 2011. Therefore, the E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.028</GPH> 51822 51823 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations only manner in which to maintain or exceed the previous year’s wage index was to match or exceed the national 3.7 percent increase in average hourly wage. Of the 3,428 hospitals with wage data for both FYs 2011 and 2012, 1,729, or 50.4 percent, experienced an average hourly wage increase of 3.4 percent or more. The following chart compares the shifts in wage index values for hospitals for FY 2012 relative to FY 2011. Among urban hospitals, 32 will experience an increase of more than 5 percent and less than 10 percent and 4 will experience an increase of more than 10 percent. Among rural hospitals, 1 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, 924 rural hospitals will experience increases or decreases of less than 5 percent, while 2,448 urban hospitals will experience increases or decreases of less than 5 percent. Sixteen urban hospitals will experience decreases in their wage index values of more than 5 percent and less than 10 percent. Three urban hospitals will experience decreases in their wage index values of greater than 10 percent. No rural hospitals will experience a decrease of more than 10 percent. No rural hospitals will experience decreases in their wage index values of greater than 5 percent but less than 10 percent. These figures reflect changes in the wage index which is an adjustment to either 68.8 percent or 62 percent of the laborrelated share 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 mstockstill on DSK4VPTVN1PROD with RULES2 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 ...................................................................................................................... e. Combined Effects of the MS–DRG and Wage Index Changes (Column 6) Section 1886(d)(4)(C)(iii) of the Act requires that changes to MS–DRG reclassifications and the relative weights cannot increase or decrease aggregate payments. In addition, section 1886(d)(3)(E) of the Act specifies that any updates or adjustments to the wage index are to be budget neutral. We computed a wage budget neutrality factor of 1.000558, and a recalibration budget neutrality factor of 0.997903 (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 0.998460, or approximately –0.15 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 final 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 hospitals and 0.1 percent decrease in payments for rural hospitals. Urban Pacific hospitals will experience a 0.3 percent increase in payments due to increases in their wages compared to the national average, while the urban East North Central area will experience a –0.4 decrease in payments because of below average increases in wages. Among the rural hospital categories, rural New England hospitals will experience the greatest increase in payment (0.4 percent) primarily due to above average VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 increases in the wage data, while the rural East North Central area will experience a 0.6 percent decrease in payments due to decreases in the wage data. f. Effects of MGCRB Reclassifications (Column 7) 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 7 reflect the per case payment impact of moving from this baseline to a simulation incorporating the MGCRB decisions for FY 2012 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. 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 0.991943 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 1.8 percent. By region, all the rural hospital categories, with the exception of the one rural Puerto Rico hospital, will experience increases in payments due to MGCRB reclassification. Rural hospitals in the East South Central PO 00000 Frm 00349 Fmt 4701 Sfmt 4700 Rural 4 32 2,448 16 3 0 0 924 0 0 region will experience a 2.6 percent increase in payments and rural hospitals in the Mountain region will experience a 0.5 percent increase in payments. Urban hospitals in New England and the Middle Atlantic will experience an increase in payments of 0.7 percent and 0.3 percent, respectively, largely due to reclassifications of hospitals in Connecticut and New Jersey. Table 9A listed in section VI. of the Addendum to this final rule and available via the Internet reflects the approved reclassifications for FY 2012. g. Effects of the Rural and Imputed Floor, Including Application of National Budget Neutrality (Column 8) As discussed in section III.B. of the preamble of the FY 2009 IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the FY 2011 IPPS/LTCH PPS 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. Beginning with FY 2008, we apply a uniform budget neutrality adjustment is applied to the wage index. In addition, as discussed in section III.F.2. of the preamble of this final rule, the imputed floor, which is budget neutral, was set to expire with the FY 2011 wage index but we are finalizing to extend the imputed floor for 2 additional years. The imputed floor only benefits hospitals located in New Jersey. For FY 2012 (and in FY 2011), the Affordable Care Act requires that we apply one rural floor budget neutrality factor to the wage index, nationally and the imputed floor is part of the rural floor budget neutrality factor applied to the wage index, nationally. The FY 2012 rural floor budget neutrality factor applied to the wage index is 0.991007, which will reduce wage indexes by ¥0.9 percent. Column 8 shows the projected impact of the rural floor and imputed floor with the national rural floor budget neutrality factor applied to the wage index. The column compares the post-reclassification FY 2012 E:\FR\FM\18AUR2.SGM 18AUR2 51824 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations wage index of providers before the rural floor and imputed floor adjustment and the postreclassification FY 2012 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 the aggregate, rural hospitals will experience a ¥0.3 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 a 5.3 percent increase in payments primarily due to the application of the rural floor in Massachusetts and the applicable national rural floor budget neutrality as required by the Affordable Care Act. All 60 urban providers in Massachusetts are expected to receive the rural floor wage index value, including rural floor budget neutrality, of 1.3452. During most past years, there have been no IPPS hospitals located in rural areas in Massachusetts. There was one urban IPPS hospital that was reclassified to rural Massachusetts under section 1886(d)(8)(E) of the Act which established the Massachusetts rural floor, but the wage index resulting from that hospital’s data was not high enough for any urban hospital to benefit from the rural floor policy. However, beginning with the FY 2012 wage index, the rural floor for the State is established by the conversion of a CAH to an IPPS hospital that is geographically located in rural Massachusetts. Massachusetts hospitals can expect approximately an 8.7 percent increase in IPPS payments due to the application of the rural floor. Urban Puerto Rico hospitals are expected to experience a 0.1 percent increase in payments as a result of the application of a Puerto Rico rural floor. Similar to Massachusetts, this is the first year in which urban Puerto Rico hospitals will receive a rural floor as a result of a new IPPS hospital located in rural Puerto Rico setting a rural floor. We are applying a rural floor budget neutrality factor to the Puerto Rico-specific wage index of 0.989417 or 1.1 percent. The Puerto Rico-specific wage index adjusts the Puerto Rico-specific standardized amount, which represents 25 percent of payments to Puerto Rico hospitals. There are 39 hospitals in New Jersey that benefit from the extension of the imputed floor and receive the imputed floor wage index value, including rural floor budget neutrality of 1.1264. Urban Middle Atlantic hospitals will experience a ¥0.1 percent decrease in payments which reflects the increase in payments for New Jersey hospitals receiving the imputed floor and a decrease for all other urban hospitals in the Middle Atlantic region. In response to a public comment, we are providing the payment impact of the rural floor and imputed floor with budget neutrality at the State level. Column 1 of the table displays the number of IPPS hospitals located in each State. Column 2 displays the number of hospitals in each State that will be receiving the rural floor or imputed floor wage index for FY 2012. Column 3 displays the percentage of total payments each State receives or contributes to fund the rural floor and imputed floor with national budget neutrality. The column compares the postreclassification FY 2012 wage index of providers before the rural floor and imputed floor adjustment and the post-reclassification FY 2012 wage index of providers with the rural floor and imputed floor adjustment. Column 4 displays an estimated payment amount that each State will gain or lose due to the application of the rural floor and imputed floor with national budget neutrality. FY 2012 IPPS ESTIMATED PAYMENTS DUE TO RURAL FLOOR AND IMPUTED FLOOR WITH NATIONAL BUDGET NEUTRALITY mstockstill on DSK4VPTVN1PROD with RULES2 State Number of hospitals Alabama ........................................... Alaska .............................................. Arizona ............................................. Arkansas .......................................... California .......................................... Colorado .......................................... Connecticut ...................................... Delaware .......................................... Florida .............................................. Georgia ............................................ Hawaii .............................................. Idaho ................................................ Illinois ............................................... Indiana ............................................. Iowa ................................................. Kansas ............................................. Kentucky .......................................... Louisiana .......................................... Maine ............................................... Massachusetts ................................. Michigan ........................................... Minnesota ........................................ Mississippi ........................................ Missouri ............................................ Montana ........................................... Nebraska .......................................... Nevada ............................................. New Hampshire ............................... New Jersey ...................................... New Mexico ..................................... New York ......................................... North Carolina .................................. North Dakota .................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Number of hospitals receiving rural floor or imputed floor 95 6 57 47 308 46 32 5 168 108 14 15 130 89 34 55 65 97 20 61 100 51 64 80 12 23 24 13 67 28 170 89 6 PO 00000 Frm 00350 Percent change in payments due to application of rural floor and imputed floor with budget neutrality 3 4 0 0 100 7 12 0 5 0 0 0 0 1 5 1 1 10 0 60 0 0 0 4 1 0 0 9 39 0 2 4 0 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM ¥0.4 1.7 ¥0.5 ¥0.4 0.2 0.4 1.9 ¥0.5 ¥0.4 ¥0.5 ¥0.4 ¥0.4 ¥0.5 ¥0.5 ¥0.3 ¥0.4 ¥0.4 ¥0.5 ¥0.4 8.7 ¥0.5 ¥0.5 ¥0.5 ¥0.4 ¥0.3 ¥0.4 ¥0.5 1.5 1.4 ¥0.3 ¥0.5 ¥0.4 ¥0.3 18AUR2 Difference (in millions) ¥$7.5 2.3 ¥8.8 ¥5.0 20.3 4.3 30.0 ¥2.0 ¥29.1 ¥13.0 ¥1.1 ¥1.0 ¥26.3 ¥11.1 ¥3.0 ¥3.5 ¥8.5 ¥7.2 ¥2.1 274.8 ¥21.4 ¥8.1 ¥5.6 ¥10.5 ¥0.8 ¥2.4 ¥3.7 6.3 54.2 ¥1.6 ¥47.5 ¥15.5 ¥0.8 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 51825 FY 2012 IPPS ESTIMATED PAYMENTS DUE TO RURAL FLOOR AND IMPUTED FLOOR WITH NATIONAL BUDGET NEUTRALITY—Continued State Number of hospitals mstockstill on DSK4VPTVN1PROD with RULES2 Ohio ................................................. Oklahoma ......................................... Oregon ............................................. Pennsylvania .................................... Puerto Rico ...................................... Rhode Island .................................... South Carolina ................................. South Dakota ................................... Tennessee ....................................... Texas ............................................... Utah ................................................. Vermont ........................................... Virginia ............................................. Washington ...................................... Washington, D.C. ............................. West Virginia .................................... Wisconsin ......................................... Wyoming .......................................... 138 85 33 152 51 11 55 19 99 320 32 6 81 48 7 32 64 11 h. Effects of the Application of the Frontier State Wage Index (Column 9) Section 10324(a) of the Affordable Care Act requires that we establish a minimum postreclassified wage index of 1.00 for all hospitals located in ‘‘frontier States.’’ The term ‘‘frontier States’’ is defined in the statute as States in which at least 50 percent of counties have a population density less 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 48 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 0.6 percent and 0.2 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 experience an increase in payments by 0.6 percent and 0.1 percent, respectively. i. Effects of the Wage Index Adjustment for Out-Migration (Column 10) 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Number of hospitals receiving rural floor or imputed floor Percent change in payments due to application of rural floor and imputed floor with budget neutrality employed in an area with a higher wage index. Overall, rural hospitals will experience a 0.1 percent increase in payments as a result of the outmigration adjustment. Rural DSH providers will experience a 0.5 percent increase in payments. There are 255 providers that will receive the out-migration adjustment in FY 2012. This out-migration wage adjustment is not budget neutral, and we estimate the impact of these providers receiving the outmigration increase to be approximately $15 million. j. Effects of the Expiration of Section 508 (Column 11) Column 11 shows our estimate of the changes in payments due to the expiration of section 508, a non-budget neutral reclassification provision, applied under the MMEA. Because this provision is not budget neutral, the expiration of this reclassification provision results in a ¥0.2 percent decrease in payments, overall. There are 88 section 508 hospitals in this payment analysis. Section 508 hospitals are generally urban hospitals, resulting in a ¥0.2 percent decrease in payments among the urban hospital category and a 0.0 percent change in payments among rural hospitals. Urban Middle Atlantic and East North Central regions will experience a decrease in payments of ¥0.4 percent and ¥0.5 percent respectively because many section 508 hospitals are located in those regions. Urban teaching hospitals that do not receive DSH will experience a ¥0.4 percent decrease in payments due to the expiration of section 508. k. Effects of All FY 2012 Changes (Column 12) Column 12 shows our estimate of the changes in payments per discharge from FY 2011 and FY 2012, resulting from all changes reflected in this final rule for FY 2012. It PO 00000 Frm 00351 ¥0.4 ¥0.4 ¥0.4 ¥0.4 0.1 ¥0.6 ¥0.4 ¥0.3 ¥0.3 ¥0.5 ¥0.4 ¥0.3 ¥0.4 ¥0.4 ¥0.5 ¥0.3 ¥0.4 0 9 2 3 16 12 0 0 0 11 4 2 0 2 2 0 3 2 0 Fmt 4701 Sfmt 4700 Difference (in millions) ¥15.8 ¥5.7 ¥3.5 ¥17.3 0.1 ¥2.2 ¥7.2 ¥0.9 ¥7.7 ¥34.0 ¥1.7 ¥0.6 ¥10.8 ¥7.3 ¥2.5 ¥2.2 ¥6.4 0.0 includes combined effects of the previous columns in the table. The average increase in payments under the IPPS for all hospitals is approximately 1.1 percent for FY 2012 relative to FY 2011. As discussed in section II.D. of the preamble of this final rule, this column includes the FY 2012 documentation and coding adjustment of ¥2.0 percent on the national standardized amount and on the hospital-specific rates. In addition, this column includes the annual hospital update of 1.9 percent to the national standardized amount. This annual hospital update includes the 3.0 percent market basket update, the reduction of 1.0 percentage point for the multifactor productivity adjustment, and the 0.1 percentage point reduction under section 3401 of the Affordable Care Act. As described in Column 2, the annual hospital update, combined with the documentation and coding adjustment, results in a ¥0.1 percent decrease in payments in FY 2012 relative to FY 2011. As described in Column 3, the 1.1 percent adjustment to the national standardized amount and the 0.9 percent adjustment to the hospital specific rate in light of a recent court decision related to rural floor budget neutrality results in a 1.1 percent increase in payments in FY 2012 relative to FY 2011. In addition, Column 11 describes a ¥0.2 percent decrease in payments due to the expiration of section 508 reclassifications that had been extended for FY 2011 under the MMEA. Section 508 was not a budget-neutral provision. The impact of moving from our estimate of FY 2011 outlier payments, 4.8 percent, to the estimate of FY 2012 outlier payments, 5.1 percent, results in an increase of 0.3 percent in FY 2012 payments relative to FY 2011. 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 12 may not equal the sum of the percentage changes described above. E:\FR\FM\18AUR2.SGM 18AUR2 51826 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations The overall change in payments per discharge for hospitals paid under the IPPS in FY 2012 is estimated to increase by 1.1 percent. The payment increase among the hospital categories is largely attributed to the updates to the rate including the hospital update and the increase to the rate associated with a recent court decision related to rural floor budget neutrality. Hospitals in urban areas will experience an estimated 1.2 percent increase in payments per discharge in FY 2012 compared to FY 2011. Hospital payments per discharge in rural areas are estimated to increase by 0.2 percent in FY 2012 as compared to FY 2011. Among urban census divisions, the smallest estimated payment increase will be 0.2 percent in the East North Central region because many of the urban providers in this region had benefited from section 508 reclassifications in FY 2011 that have expired for FY 2012. Urban hospitals in New England will see the largest payment increases (5.6 percent) because the Massachusetts hospitals are benefitting from the rural floor in their State. Furthermore, urban Puerto Rico hospitals will experience a 1.2 percent increase in payments due to the application of the rural floor. Among the rural regions, the providers in the East South Central and West South Central regions will experience decreases in payments of ¥0.5 percent and 0.3 percent respectively, due to decreases in wage data and the downward adjustment applied to their wage index for rural floor budget neutrality. Rural hospitals in the Pacific region will experience an increase in payments of 0.7 percent because the rural providers in this region benefit from higher than average wage data and MGCRB reclassification. Among special categories of hospitals, MDHs will receive an estimated payment increase of 0.5 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. SCHs are paid the higher of their Federal rate and the hospital-specific rate. Overall, SCHs will experience an estimated decrease in payments by 0.7 percent. Rural hospitals reclassified for FY 2012 are anticipated to receive a 0.5 percent payment increase. Rural hospitals that are not reclassifying are estimated to receive a payment decrease of 0.3 percent due to lower wage data, changes to the relative weights and application of rural floor budget neutrality. Urban reclassified hospitals will experience the average payment increase at 1.1 percent due to the benefits under MGCRB reclassification and the rural floor. Urban nonreclassified hospitals will experience a payment increase of 1.2 percent. Cardiac hospitals are expected to experience a payment decrease of 1.2 percent in FY 2012 relative to FY 2011. 3. Impact Analysis of Table II Table II presents the projected impact of the changes for FY 2012 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 2011 with the average payments per discharge for FY 2012, as calculated under our models. 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 12 of Table I. TABLE II—IMPACT ANALYSIS OF CHANGES FOR FY 2012 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE PAYMENT SYSTEM [Payments per discharge] mstockstill on DSK4VPTVN1PROD with RULES2 All hospitals .............................................................................................. By Geographic Location: Urban hospitals ................................................................................. Large urban areas (populations over 1 million) ............................... Other urban areas (populations of 1 million or fewer) ..................... Rural hospitals .................................................................................. Bed Size (Urban): 0–99 beds ......................................................................................... 100–199 beds ................................................................................... 200–299 beds ................................................................................... 300–499 beds ................................................................................... 500 or more beds ............................................................................. Bed Size (Rural): 0–49 beds ......................................................................................... 50–99 beds ....................................................................................... 100–149 beds ................................................................................... 150–199 beds ................................................................................... 200 or more beds ............................................................................. Urban by Region: New England .................................................................................... Middle Atlantic .................................................................................. South Atlantic ................................................................................... East North Central ............................................................................ East South Central ........................................................................... West North Central ........................................................................... West South Central .......................................................................... Mountain ........................................................................................... Pacific ............................................................................................... Puerto Rico ....................................................................................... Rural by Region: New England .................................................................................... Middle Atlantic .................................................................................. South Atlantic ................................................................................... East North Central ............................................................................ East South Central ........................................................................... West North Central ........................................................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00352 Fmt 4701 Average FY 2011 payment per discharge Average FY 2012 payment per discharge All FY 2012 changes (2) Number of hospitals (3) (4) 3,423 $10,359 1.1 2,498 1,371 1,127 925 10,658 11,239 9,944 7,657 10,783 11,378 10,051 7,675 1.2 1.2 1.1 0.2 632 782 449 430 205 8,202 8,989 9,738 10,952 13,141 8,289 9,101 9,847 11,062 13,316 1.1 1.2 1.1 1 1.3 320 348 152 58 47 6,174 7,169 7,424 8,416 9,438 6,157 7,162 7,449 8,458 9,501 ¥0.3 ¥0.1 0.3 0.5 0.7 120 320 380 401 153 169 366 159 380 50 11,136 11,772 9,809 10,043 9,492 10,256 9,995 10,803 13,112 5,299 11,761 11,877 9,891 10,060 9,535 10,379 10,123 10,892 13,316 5,362 5.6 0.9 0.8 0.2 0.5 1.2 1.3 0.8 1.6 1.2 23 69 165 120 170 99 Sfmt 4700 $10,249 10,175 8,037 7,362 7,966 7,027 8,145 10,210 8,096 7,400 7,997 6,992 8,196 0.3 0.7 0.5 0.4 ¥0.5 0.6 E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 51827 TABLE II—IMPACT ANALYSIS OF CHANGES FOR FY 2012 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE PAYMENT SYSTEM—Continued [Payments per discharge] Average FY 2011 payment per discharge mstockstill on DSK4VPTVN1PROD with RULES2 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 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 All FY 2012 changes (3) (4) 183 66 29 1 6,737 8,509 10,235 2,280 6,720 8,533 10,307 2,299 ¥0.3 0.3 0.7 0.8 2,519 1,384 1,135 904 10,643 11,224 9,925 7,733 10,768 11,362 10,032 7,751 1.2 1.2 1.1 0.2 2391 792 240 8,592 10,136 15,078 8,676 10,233 15,289 1 1 1.4 739 1547 337 8,951 11,137 7,627 9,026 11,275 7,696 0.8 1.2 0.9 417 222 27 134 7,117 8,471 6,372 5,928 7,069 8,526 6,384 5,952 ¥0.7 0.7 0.2 0.4 827 144 1057 491 12,180 9,858 9,120 8,529 12,327 9,946 9,237 8,600 1.2 0.9 1.3 0.8 175 320 193 120 18 8,561 8,149 6,397 9,420 8,467 8,616 8,090 6,432 9,479 8,513 0.6 ¥0.7 0.5 0.6 0.5 1,985 870 566 10,394 9,115 10,869 10,512 9,195 10,967 1.1 0.9 0.9 358 1,695 1,081 198 14,311 10,897 8,505 7,456 14,494 11,025 8,567 7,522 1.3 1.2 0.7 0.9 655 2768 323 2142 332 532 40 62 9,793 10,371 10,668 10,673 8,260 6,825 8,598 7,263 9,881 10,487 10,780 10,800 8,305 6,803 8,615 7,283 0.9 1.1 1.1 1.2 0.5 ¥0.3 0.2 0.3 19 West South Central .......................................................................... Mountain ........................................................................................... Pacific ............................................................................................... Puerto Rico ....................................................................................... By Payment Classification: Urban hospitals ................................................................................. Large urban areas (populations over 1 million) ............................... Other urban areas (populations of 1 million or fewer) ..................... Rural areas ....................................................................................... Teaching Status: Non-teaching .................................................................................... Fewer than 100 Residents ............................................................... 100 or more Residents ..................................................................... Urban DSH: Non-DSH .......................................................................................... 100 or more beds ............................................................................. Less than 100 beds .......................................................................... Rural DSH: SCH .................................................................................................. RRC .................................................................................................. 100 or more beds ............................................................................. Less than 100 beds .......................................................................... Urban teaching and DSH: Both teaching and DSH .................................................................... Teaching and no DSH ...................................................................... No teaching and DSH ...................................................................... No teaching and no DSH ................................................................. Rural Hospital Types: RRC .................................................................................................. SCH .................................................................................................. MDH .................................................................................................. SCH and RRC .................................................................................. MDH and RRC ................................................................................. Type of Ownership: Voluntary ........................................................................................... Proprietary ........................................................................................ Government ...................................................................................... Medicare Utilization as a Percent of Inpatient Days:. 0–25 .................................................................................................. 25–50 ................................................................................................ 50–65 ................................................................................................ Over 65 ............................................................................................. Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY 2012 Reclassifications: All Reclassified Hospitals FY 2012 .................................................. All Non-Reclassified Hospitals FY 2012 .......................................... Urban Reclassified Hospitals FY 2012: ........................................... Urban Non-reclassified Hospitals FY 2012 ...................................... Rural Reclassified Hospitals FY 2012 .............................................. Rural Nonreclassified Hospitals FY 2012: ....................................... All Section 401 Reclassified Hospitals: ............................................ Other Reclassified Hospitals (Section 1886(d)(8)(B)) ...................... Specialty Hospitals: Cardiac Hospitals ............................................................................. H. Effects of Other Policy Changes Average FY 2012 payment per discharge (2) Number of hospitals 11,158 11,288 1.2 the impacts of these changes. Our estimates of the likely impacts associated with these other changes are discussed below. 1. Effects of Proposed Policy on HACs, Including Infections In section II.F. of the preamble of this final rule, we discuss our implementation of PO 00000 Frm 00353 Fmt 4701 Sfmt 4700 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 E:\FR\FM\18AUR2.SGM 18AUR2 51828 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations through application of evidence-based guidelines. For discharges occurring on or after October 1, 2008, hospitals will not receive additional payment for cases in which one of the selected conditions was not present on admission, unless, based on data and clinical judgment, it cannot be determined at the time of admission whether a condition is present. That is, the case will be paid as though the secondary diagnosis were not present. However, the statute also requires the Secretary to continue counting the condition as a secondary diagnosis that results in a higher IPPS payment when doing the budget neutrality calculations for MS– DRG reclassifications and recalibration. Therefore, we will perform our budget neutrality calculations as though the payment provision did not apply, but Medicare will make a lower payment to the hospital for the specific case that includes the secondary diagnosis. Thus, the provision results in cost savings to the Medicare program. We note that the provision will only apply when one or more of the selected conditions are the only secondary diagnosis or diagnoses present on the claim that will lead to higher payment. Medicare beneficiaries will generally have multiple secondary diagnoses during a hospital stay, such that beneficiaries having one MCC or CC will frequently have additional conditions that also will generate higher payment. Only a small percentage of the cases will have only one secondary diagnosis that would lead to a higher payment. Therefore, if at least one nonselected 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. In section II.F. of the preamble of this final rule, we discuss our decision not to add one HAC for FY 2012: Contrast-Induced Acute Kidney Injury. Therefore, we have deleted the cost estimates for this proposed HAC from the proposed savings estimates for the next 5 fiscal years. The HAC payment provision went into effect on October 1, 2008. Our savings estimates for the next 5 fiscal years are shown below: mstockstill on DSK4VPTVN1PROD with RULES2 Year FY FY FY FY FY 2012 2013 2014 2015 2016 Savings (in millions) ............................ ............................ ............................ ............................ ............................ $21 22 23 25 27 2. 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 two applications for add-on VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 payments for new medical services and technologies for FY 2012, as well as the status of the new technology that was approved to receive new technology add-on payments in FY 2011. As explained in that section, add-on payments for new technology under section 1886(d)(5)(K) of the Act are not required to be budget neutral. As discussed in section II.I.4. of the preamble of this final rule, we are not approving either of the two applications for new technology add-on payments for FY 2012. However, we are finalizing our proposal to continue to make new technology add-on payments in FY 2012 for the AutoLITTTM (because the technology is still within the 3-year anniversary of the product’s entry onto the market). 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 2012 as if every claim that would qualify for a new technology add-on payment would receive the maximum add-on payment. For FY 2011, the applicant estimates that approximately 170 Medicare beneficiaries will be eligible for the AutoLITTTM. Therefore, based on the applicant’s estimate from FY 2011, we currently estimate that payments for the AutoLITTTM will increase overall FY 2012 payments by $900,000. 3. Effects of Requirements for Hospital Inpatient Quality Reporting (IQR) Program In section VII.C. of Appendix A of the FY 2011 IPPS/LTCH PPS final rule (75 FR 50662 through 50663), we discussed the impact of the FY 2011 through FY 2014 Hospital Inpatient Quality Reporting (IQR) Program requirements we adopted in that final rule. We estimated that 95 hospitals would not receive the full payment update in any fiscal year from FY 2012 through FY 2014. At the time that 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 under the Hospital IQR Program in order to receive the full update to the standardized amount for FY 2012 through FY 2015. We now estimate that approximately 104 hospitals may not receive the full update in any fiscal year. (In section IV.A.2.b. of this final rule, we finalized that, for the FY 2014 payment determination, we would retire four measures (AMI–4, HF–4, PN–4, and PN–5c) and suspend data collection for four measures (AMI–1, AMI–3, AMI–5, and SCIP–INF–6), beginning with January 1, 2012 discharges. We believe that these changes will not have a significant effect on our estimate.) We believe that most of these hospitals will be either small rural or small urban hospitals. However, at this time, information is not available to determine the precise number of hospitals that will not meet the requirements to receive the full annual percentage increase for FY 2012 through FY 2015. In section IV.A.7. of the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50225 through PO 00000 Frm 00354 Fmt 4701 Sfmt 4700 50229), we established Hospital IQR validation requirements for the FY 2012 and FY 2013 payment determinations. Beginning with 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 four quarters of data from the last quarter of CY 2011 through the third quarter of CY 2012. In previous years, charts were requested by the CMS CDAC contractor and hospitals were given 45 days from the date of the request to submit the requested records. In section IV.A.6.a. of this final rule and in proposed § 412.140(d)(1), beginning with the FY 2012 we are reducing the deadline from 45 days to 30 days for hospitals to return requested medical record documentation to support our validation requirement. This may be an additional administrative burden to hospitals selected for validation. However, this deadline is in line with our QIO regulations at § 476.78 and the burden will be 18 charts for each for the four quarters that must be copied and mailed in a 30 day period for FY 2012 and subsequent years. In addition, we are adding a new § 478.78(b)(2)(ii) that will require the submission of medical information within 21 days in those situations in which a ‘‘serious reportable event’’ or other circumstance has been identified during the course of a QIO review. We do not believe this will cause a significantly higher administrative burden on the hospitals, because CMS reimburses providers returning medical records to QIOs at the rate of 12 cents per page for copying and approximately $4.00 per chart for postage. Given that we reimburse for the data collection effort, we believe that this requirement represents a minimal burden to providers. We have continued our efforts to ensure that QIOs provide assistance to all hospitals that wish to participate in the Hospital IQR Program. In section IV.A.6.b. of this final rule, for FY 2014 payment determinations and subsequent years, we are adding two strata to the current Hospital IQR validation sample of SCIP, AMI, HF, and PN cases. For the first stratum, we are selecting three cases per selected hospital per quarter to validate the CLABSI measure using a two step selection process that would target potential patients with positive infection from blood culture results and a Central Venous Catheter. The requirement of an additional 3 charts per hospital submitted for validation for the CLABSI measure will result in approximately 2,400 total additional charts per quarter being submitted to CMS by all selected hospitals. We reimburse hospitals for the cost of sending charts to the 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 275 pages. Thus, we will expend approximately $88,800 per quarter to collect the additional charts we need to validate the CLASBI measure. Additionally, we will collect the CLABSI-specific data elements from all charts currently requested for the Hospital IQR validation. We will validate a total of 15 records per quarter per E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 validated hospital in 5 strata (SCIP, AMI, HF, PN, CLABSI and the ED/Global Immunization measure). In section IV.A.6.b. of this final rule, for FY 2014 and subsequent years, we are adding a second stratum to our validation sample, which will enable us to validate the EDT and the Immunization for Influenza and Immunization for Pneumonia global measures. Thus, we will be validating a total of 18 records per quarter per selected hospital in 6 strata ((1) SCIP, (2) AMI, (3) HF, (4) PN, (5) CLABSI, and (6) EDT/ immunization measures). Under the assumptions outlined above, we will expend approximately $88,800 per quarter to collect the additional charts for the EDT/ immunization measures. The total requirement of 18 charts per hospital will result in approximately 14,400 charts per quarter being submitted to CMS. Using the assumptions discussed above, for the FY 2014 Hospital IQR Program, we estimate that CMS will have expenditures of approximately $532,800 per quarter related to the validation requirement. Additionally, we will collect the CLABSI-specific data and the EDT/Immunization data elements from all charts currently requested for Hospital IQR validation. We will validate a total of 18 records per quarter per validated hospital in 6 strata (SCIP, AMI, HF, PN, CLABSI and the ED/Global Immunization measure). We do not believe this will be an additional burden on the hospitals because these data will be abstracted from records already submitted. Given that we reimburse for the data collection effort, we believe that a requirement for 18 charts per hospital per quarter represents a minimal burden to participating hospitals selected for validation. Finally, with respect to our validation requirements, we also are providing that, for FY 2015, we will select additional hospitals for validation if they were open under their current CCNs in FY 2012 but not selected for validation in the three previous annual Hospital IQR Program validation selections. This provision could affect data collection VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 costs and burdens, but we are unable to estimate any impact at this time. 4. Effects of Additional Hospital Value-Based Purchasing (VBP) Program Requirements Section 1886(o)(1)(B) of the Act directs the Secretary to begin making value-based incentive payments under the Hospital VBP Program to hospitals for discharges occurring on or after October 1, 2012. These incentive payments will be funded for FY 2013 through a reduction to the FY 2013 base operating MS–DRG payment for each discharge of 1 percent, as required by section 1886(o)(7)(B)(i) of the Act. The applicable percentage for FY 2014 is 1.25 percent, for FY 2015 is 1.5 percent, for FY 2016 is 1.75 percent, and for FY 2017 and subsequent years is 2 percent. In section IV.B. of the preamble of this final rule, we are adding requirements for the FY 2014 Hospital VBP Program. Specifically, we are adding a Medicare Spending per Beneficiary Measure, how the measure will be scored, and the measure’s performance period and baseline period. Because this additional measure is claims-based and is required for the Hospital IQR Program, its inclusion in the Hospital VBP Program does not result in any additional burden because the Hospital VBP Program uses data that are required for the Hospital IQR Program. 5. Effects of Requirements for Hospital Readmissions Reduction Program In section IV.C. of the preamble of this final rule, we are selecting three high cost, high volume conditions for the Hospital Readmission Reduction Program FY 2013 payment reduction, and the definition of readmission for these conditions. We also are finalizing the use of the following three measures for these conditions for the FY 2013 payment determination: • Heart failure [HF] 30-day Risk Standardized Readmission Measure • Acute Myocardial Infarction [AMI] 30-day Risk Standardized Readmission Measure • Pneumonia [PN] 30-day Risk Standardized Readmission Measure PO 00000 Frm 00355 Fmt 4701 Sfmt 4700 51829 These three risk-adjusted NQF endorsed measures will be calculated by CMS for hospitals subject to this provision using Medicare FFS Part A and B claims data, and require no submission of additional data by the hospital. Therefore, there is no data collection burden associated with this provision for FY 2013. These measures also are used under the Hospital IQR Program, and have been publicly reported on the Hospital Compare Web site since 2009. Therefore, there is a high degree of familiarity and acceptance among the stakeholder community with regard to these measures. We also are establishing a methodology for calculating the Excess Readmission Ratio using these three measures for the FY 2013 payment determination. This is defined as a ratio of the number of risk-adjusted readmissions (based on actual readmissions) for the given condition at a specified hospital compared with the number of readmissions that will be expected for an average hospital caring for the same patients. Below is a description of this calculation: Numerator—Adjusted number of readmission at specific hospital (calculated for each patient and add up results for all patients): Hospital-specific readmission effect + average hospital contribution to readmission risk + [risk factor weights × patient risk factors] Denominator—Number of readmissions if an average hospital treated the same patients (calculated for each patient and summed for all patients): Average hospital contribution to readmission risk + [risk factor weights × patient risk factors] We are providing a minimum case threshold of 25 cases for a given condition in order to have an Excess Readmission Ratio calculated. Using the 25-case threshold, we have analyzed the distribution of Excess Readmission Ratio calculations on various types of IPPS hospitals. The results of these analyses are shown in the three tables below. BILLING CODE 4120–01–P E:\FR\FM\18AUR2.SGM 18AUR2 VerDate Mar<15>2010 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00356 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.029</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51830 VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00357 Fmt 4701 Sfmt 4725 E:\FR\FM\18AUR2.SGM 18AUR2 51831 ER18AU11.030</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations The three tables above show the distribution of Excess Readmission Ratios for VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 AMI hospitalizations, HF hospitalizations, and PN hospitalizations respectively. The PO 00000 Frm 00358 Fmt 4701 Sfmt 4700 data for these tables come from the publiclyreported risk-standardized rates of E:\FR\FM\18AUR2.SGM 18AUR2 ER18AU11.031</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 51832 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations readmission reported in 2010 on Hospital Compare (representing hospitalizations between July 2006 and June 2009). The distributions of the ratios are shown only for hospitals with at least 25 cases included in the measures over the 3-year period. The first column of the tables lists hospital characteristics (census region, bed size, teaching status, and urban/rural location) and the second column shows the number of hospitals included in the distribution for the particular category. For example, for the first table, AMI readmission, a total of 2,477 hospitals had at least 25 included hospitalizations between July 2006 and June 2009. Of these hospitals, 148 were in the New England region. The third and fourth columns show the number and percentage of hospitals (of those with 25 or more cases) in the particular category with an Excess Readmission Ratio less than or equal to 1; such hospitals would not have their payments adjusted due to the Readmission Reduction Program because they would not be found to have ‘‘excess’’ readmissions. For example in the first table, for AMI readmissions, 72 of the 148 hospitals in the New England region (that had 25 or more AMI hospitalizations) had an Excess Readmission Ratio of less than or equal to 1, which means that 48.6 percent of the hospitals in the New England region (with at least 25 cases of AMI in 3 years) would not have their payments affected by the Hospital Readmission Reduction Program, whereas the remaining hospitals would be at risk of a payment reduction based on excess readmissions. The following eight columns show the distribution of the excess readmissions. For example, for AMI, in the New England region the mean Excess Readmission Ratio is 1.0060, the lowest 5th percentile hospitals had ratios of 0.9172 or less and the hightest 95th percentile of hospitals had Excess Readmission Ratios of 1.1104 or greater. The final column of each table shows the number of hospitals, within the given category, that are not included in the distribution based on sample size. For example, for AMI, in the New England region 30 hospitals are not included in the distribution because they had fewer than 25 AMI hospitalizations over the 3-year period. Currently, 25 hospitalizations is the minimum number of hospitalizations for public reporting. Hospitals with fewer than 25 cases for a given condition do not have risk-standardized rates of readmission reported on Hospital Compare. We are finalizing this threshold for the Readmission Reduction Program. Overall these analyses show, for all three conditions, that in all hospital categories approximately half of the hospitals are at risk of payment reductions based on excess readmissions. This percentage does not vary greatly by region; however for all three measures the Mid-Atlantic region has the lowest percentage of hospitals with Excess Readmission Ratios of less than or equal to 1 and, therefore, the Mid-Atlantic region is the region with the highest percentage of hospitals at risk of payment reduction. By contrast, the Mountain region has the largest percentage of hospitals with ratios of less VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 than or equal to 1. The distributions do not differ greatly by bed size, though the largest hospitals have slightly lower percentages of hospitals with ratios less than or equal to 1 for AMI and PN. The distributions do not vary greatly by teaching status or rural/urban location for any of the measures. We also are publicly reporting the readmission rates for these three measures on the Hospital Compare Web site using the current processes employed for public reporting of these measures, which includes a preview period. We believe that this also poses no additional burden to hospitals, as they currently employ this system for Hospital IQR public reporting. 6. Effects of Policy Changes Relating to Payment Adjustments for Medicare Disproportionate Share Hospitals (DSHs) and Indirect Medical Education (IME) In section IV.G. of the preamble of this final rule, we are finalizing our proposal to exclude from the hospital’s disproportionate patient percentage (DPP) of the Medicare DSH calculation and from the available bed day count used to calculate the DSH payment adjustment and the IME payment adjustments, patient days for hospice patients receiving inpatient hospice services in a hospital setting. For the purpose of the DSH payment adjustment calculation, the patient days for hospice patients receiving inpatient hospice services in the hospital are excluded from both the numerator and the denominator of the Medicare and Medicaid fractions. As such, the impact on hospitals’ DSH payment adjustment will vary based on the demographic composition of an individual hospital’s patient population. In other words, under this policy, some hospitals may receive increased DSH payment adjustments and other hospitals may expect to receive lower DSH payment adjustments, depending on the extent to which a hospital provides inpatient hospice services to hospice patients. The final policy of excluding, from the available bed count, patient days for hospice patients receiving hospice services in an inpatient hospital setting only impacts DSH payment adjustments for limited situations. Specifically, urban hospitals with fewer than 100 beds or rural hospitals with fewer than 500 beds, with the exception of rural referral centers or MDHs, are subject to a cap of their DSH payment adjustment of 12 percent. Thus, a decrease in the number of available beds due to the exclusion of beds used to provide inpatient hospice services only impacts a provider’s DSH payment adjustments if it results in the hospital’s bed count falling below the bed count threshold. Should a hospital fall below the bed count threshold, it would become subject to the Medicare DSH payment adjustment cap and its DSH payment could decrease. For IME payment purposes, a decrease in a hospital’s number of available beds results in an increase in the resident-to-bed ratio. The exclusion of bed days associated with hospice patients from the available bed count for IME will reduce the available beds, increase the resident-to-bed ratio, and, consequently, may increase IME payments to teaching hospitals, depending on the extent to which these hospitals were providing PO 00000 Frm 00359 Fmt 4701 Sfmt 4700 51833 inpatient hospice services to hospice patients. 7. Effects of the FY 2012 Low-Volume Hospital Payment Adjustment As discussed in section IV.E. of the preamble to this final rule, we discuss the provisions of sections 3125 and 10314 of the Affordable Care Act that expand eligibility for the low-volume hospital payment adjustment at section 1886(d)(12) of the Act for FYs 2011 and 2012 to hospitals with less than 1,600 Medicare discharges (instead of the prior requirement of less than 800 total, Medicare and non-Medicare, discharges) and hospitals that are located more than 15 miles from other IPPS hospitals (rather than the prior requirement of more than 25 miles). The payment adjustment is also changed 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 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 (75 FR 50241). Based on FY 2010 claims data (March 2011 update of the MedPAR file), we estimate that 514 out of the 529 hospitals in our database that qualified as a low-volume hospital for FY 2011 will continue to meet the Medicare discharges criterion to qualify as a lowvolume hospital for FY 2012. For purposes of this impact analysis, we are assuming that all of these 514 hospitals will continue to meet the distance criterion in FY 2012. If all 514 hospitals qualified for the low-volume payment adjustment in FY 2012, we estimate that these hospitals will receive an additional estimated $293 million based on the FY 2012 low-volume payment adjustment (described in section IV.E. of the preamble of this final rule) as compared to FY 2012 payments without the proposed low-volume adjustment. (As discussed in section IV.E. of the preamble of this final rule, for FY 2012, we are determining a hospital’s number of Medicare discharges based on the most recent update of the FY 2010 MedPAR files (that is, the March 2011 update for this final rule.) In addition, we identified an additional 86 hospitals in our database that meet the Medicare discharges criterion to qualify as a low-volume hospital for FY 2012 based on our policy of determining a hospital’s Medicare discharges based on data from the March 2011 update of the FY 2010 MedPAR file (as established in section IV.E. of the preamble of this final rule). (We note that these 86 hospitals did not meet the discharge criterion to qualify as a low-volume hospital for FY 2011.) However, we are not able to estimate the number of these 86 hospitals that will also meet the distance criterion. The actual number of hospitals that will also meet the distance criterion to qualify as a lowvolume hospital is very likely be significantly less than the estimated 86 maximum number of potential additional low-volume hospitals for FY 2012 (as compared to FY 2011). (We note that approximately 40 percent of the hospitals that met the discharge criterion for E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51834 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations FY 2011 also met the mileage criterion and, therefore, are eligible to receive the lowvolume payment adjustment in FY 2011.) If all these 86 hospitals were to qualify as lowvolume hospitals in FY 2012, we estimate that an additional $23 million in payments will be made for the FY 2012 low-volume payment adjustment at section 1886(d)(12) of the Act. 8. Effects of Changes Relating to MDHs As discussed in section IV.H. of the preamble to this final rule, section 3124 of Public Law 111–148 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 had no impact on 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 updated costs per discharge, rather than the Federal rate, if this results in a greater aggregate payment. Therefore, the impact of the extension is one additional year of hospital-specific rate payments, when greater than Federal rate payments, for these hospitals as MDHs, rather than Federal rate payments for these hospitals without special treatment as MDHs. 9. Effects of Policy Relating to CRNA Services Furnished in Rural Hospitals and CAHs In section IV.I. of the preamble of this final rule, we discuss the interim final rule with comment that appeared in the November 24, 2010 Federal Register (75 FR 72256) regarding pass-through payment for CRNA services. In that interim final rule with comment period, we stated that we were changing the effective date of our policy to allow hospitals and CAHs that have reclassified as rural under 42 CFR 412.103 to be eligible for CRNA pass-through from ‘‘cost reporting periods beginning on or after October 1, 2010’’ to an effective date of ‘‘December 2, 2010.’’ In section IV.I. of the preamble of this final rule, we respond to the comment received on the interim final rule with comment period and state that we are finalizing the effective date of December 2, 2010, that was established in the interim final rule with comment period. Also in the interim final rule with comment period (75 FR 72258), we stated that a change to the effective date would only affect at most a small subset of hospitals and CAHs affected by the change to the regulations adopted in the FY 2010 IPPS/LTCH PPS final rule and, for this reason, we expected the change to the effective date in the interim final rule with comment period to have a minor impact on Federal expenditures. We continue to expect that this change to the effective date will have a minor impact on Federal expenditures. 10. 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 a county that ranks, based upon its ranking in age, sex, and race adjusted VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 spending for benefits under Medicare Parts A and B per enrollee, within the lowest quartile of counties. In the FY 2011 IPPS/LTCH PPS final rule, we identified the list of eligible counties, the qualifying hospitals, and their payment amounts and stated that we would distribute $150 million in FY 2011 and $250 million in FY 2012. In section IV.J. of the preamble to this final rule, we modified the lists of qualifying hospitals and their payment amounts for FYs 2011 and 2012 because we found that some of the hospitals listed as qualifying hospitals for section 1109 payments were no longer subsection (d) hospitals, a requirement to receive payments under section 1109 of the Act. Following these revisions, for FY 2011, there are 404 subsection (d) hospitals that are receiving payments under section 1109 of the Act. For FY 2012, there are 402 subsection (d) hospitals that will receive payments under section 1109 of the Act, although the number of qualifying hospitals may change should any of them cease to be a subsection (d) hospital prior to FY 2012. Furthermore, in this final rule, we finalized our proposal to spend the remaining $250 million in FY 2012. We also finalized our proposal to make payments to the qualifying hospitals through a one-time annual payment made by one Medicare contractor who would directly pay all of the qualifying hospitals. In section IV.J. of the preamble to this final rule, Table J1 lists the distribution of payments among the list of qualifying hospitals. 11. Effects of Changes Relating to ESRD AddOn Payment In section IV.L. of the preamble of this final rule, we discuss our clarification that the term ‘‘Medicare discharges’’ as used in § 412.104(a) refers to discharges of all beneficiaries entitled to Medicare Part A; that is, discharges associated with individuals entitled to Part A, including discharges of individuals receiving benefits under original Medicare, discharges of individuals whose inpatient benefits are exhausted or whose stay was not covered by Medicare, and discharges for individuals enrolled in Medicare Advantage Plans, cost contracts under section 1876 of the Act (health maintenance organizations (HMOs)) and competitive medical plans (CMPs). We are not able to provide a detailed analysis of the impact of the clarification of this definition. We are not making any changes to the existing regulations at § 412.104 under which we will continue to provide an additional Medicare payment to a hospital for inpatient services provided to Medicare beneficiaries with ESRD who receive a dialysis treatment during a hospital stay, if the hospital has established that ESRD Medicare beneficiary discharges, excluding certain MS–DRGs for renal failure, admission for renal dialysis, and kidney transplant, where the beneficiary received dialysis services during the inpatient stay, are 10 percent or more of its total Medicare discharges. We note that this clarification could change both the denominator (total Medicare discharges) and the numerator (ESRD Medicare beneficiary discharges, excluding certain MS–DRGs for renal failure, admission for renal dialysis, and kidney transplant) associated with this calculation. PO 00000 Frm 00360 Fmt 4701 Sfmt 4700 As a result of our clarification, these discharges will be included in the denominator of the calculation for the determination of eligibility for the ESRD additional payment to hospitals. Similarly, for the numerator of this calculation, we also will include all discharges of ESRD beneficiaries who are entitled to Medicare Part A and who receive inpatient dialysis, subject to the exclusions of certain MS–DRG codes described above. Depending on whether or not the additional discharges are for ESRD beneficiaries, the calculation may increase or decrease. 12. Effects of Changes Relating to the Reporting Requirements for Pension Costs for Medicare Cost-Finding and Wage Reporting Purposes In sections III.D.3. and IV.M. of the preamble of this final rule, we are revising our policy for determining pension cost for Medicare purposes. We are setting forth two distinct policies: one for determining and reporting defined benefit pension costs on the cost report for Medicare cost-finding purposes and the other for determining and reporting defined benefit pension costs for Medicare wage index purposes. The allowable pension cost under the current rules and the revised policies are based on the amount funded. The current rules impose an actuarially based limit on the allowable amount and the rules adopted in this final rule limit the costs used in Medicare costfinding based on historical funding data. Because the current rules and the policies adopted in this final rule are both tied to the amount funded, we expect that there will be minimal impact. We note that it is not possible to determine a precise impact for Medicare cost-finding purposes because we do not currently have data in the form and manner required to calculate the pension costs for all providers under our final policies. Moreover, because we lack these data, we are unable to determine a hospitallevel impact for the Medicare wage index. We note that our policies may result in redistribution within the Medicare wage index, but section 1886(d)(3)(E) of the Act requires any adjustments or updates made to the Medicare wage index to be budget neutral. 13. Effects of Implementation of Rural Community Hospital Demonstration Program In section IV.N. of the preamble of this final rule, we discuss our implementation of section 410A of Public Law 108–173, as amended, which requires the Secretary to conduct a demonstration that would modify reimbursement for inpatient services for up to 30 rural community 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 IV.N. of the preamble of this final rule, in the IPPS final rules for each of the previous 7 fiscal years, we have estimated the additional payments made by the program for each of the participating hospitals as a result of the E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations demonstration. In order 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. We are making an adjustment in the FY 2012 IPPS final rule of $52,452,060 to the national IPPS rates to account for estimated demonstration cost for FY 2012 for the 7 ‘‘pre-expansion’’ participating hospitals that are currently participating in the demonstration and the 18 additional hospitals selected to participate as a result of the expansion of the demonstration under the Affordable Care Act. In addition, in the FY 2012 proposed rule, we stated that the budget neutrality adjustment would also account for any differences between the cost of the demonstration program for hospitals participating in the demonstration during FYs 2007 and 2008, represented by their cost reports beginning in FYs 2007 and 2008, and the amount that was offset by the budget neutrality adjustment for FYs 2007 and 2008. In the proposed rule, we stated that we could not establish the amount of this difference because settled cost reports beginning in FYs 2007 and 2008 in the demonstration were not available. Similarly, for this final rule, the estimated $52,452,060 that we are offsetting does not account for any differences between the cost of the demonstration program for hospitals participating in the demonstration during FYs 2007 and 2008 and the amount that was offset by the budget neutrality adjustment for FYs 2007 and 2008 because the specific numeric value associated with this component of the adjustment to the national IPPS rates cannot be known at this time. This is because settled cost reports beginning in FYs 2007 and 2008 of the hospitals participating during FYs 2007 and 2008 in the demonstration also are not available at this time. 14. Effects of Changes to the List of MS–DRGs Subject to Postacute Care Transfer and DRG Special Pay Policy In section IV.P. of the preamble to this final rule, we discuss changes to the list of MS– DRGs subject to the postacute care transfer and DRG special payment policies. As reflected in Table 5 listed in section VI. of the Addendum to this final rule and available via the Internet, using criteria set forth in regulation at § 412.4, we evaluated MS–DRG charges, discharge, and transfer data to determine which MS–DRGs qualify for the postacute care transfer and DRG special pay policies. We note that we are making no change to these payment policies in this FY 2012 final rule. We are changing the status of certain MS–DRGs as a result of revision of VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 the MS–DRGs for FY 2012. We are changing the status of five MS–DRGs to qualify for the postacute care transfer policy in FY 2012, after not qualifying in FY 2011. An additional three MS–DRGs that qualified under the policy in FY 2011 do not qualify in FY 2012, and we are changing their status accordingly. Finally, three MS–DRGs now qualify for the MS–DRG special pay policy in FY 2012 after not qualifying in FY 2011, and we are adding them to the list of qualifying MS–DRGs. Column 4 of Table I in this Appendix A 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. 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. The analysis and methods determining the changes due to the MS– DRGs and relative weights accounts for and includes changes in MS–DRG postacute care transfer and special pay policy statuses. We refer readers to section I.G.2.f. of this Appendix for a more detailed discussion of payment impacts due to MS–DRG reclassification policies. 15. Effects of Changes Relating to Hospital Services Furnished Under Arrangements In section IV.Q. of the preamble of this final rule, we are limiting the services that a hospital may provide under arrangement. Routine services must be provided in the hospital in which the patient is a registered inpatient in order for the services to be considered as being provided by the hospital. Only diagnostic and therapeutic services (that is, ancillary services) may be provided under arrangement outside the hospital. We are aware of only a few cases where routine services are being provided outside the hospital other than where the patient is a registered inpatient. Even in those few instances where a hospital (hospital A) is currently treating the services that are provided under arrangements at another hospital (hospital B), as if they are provided by hospital A and reporting the costs on hospital A’s cost report, complying with this change should not be a burden on either the patient or the hospital. Under this policy, when the patient is transferred to hospital B for the services, the patient will need to be discharged from hospital A and admitted to hospital B. Therefore, we have determined that the impact of this change is negligible. 16. Effects of Change Relating to CAH Payment for Ambulance Services In section VI.B. of the preamble of this final rule, we discuss our revision of the regulations at § 413.70(b)(5) to state that, effective for cost reporting periods beginning on or after October 1, 2011, payment for ambulance services furnished by a CAH or by a CAH-owned and operated entity 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. In addition, we are revising the regulations at § 413.70(b)(5) to state that, effective for PO 00000 Frm 00361 Fmt 4701 Sfmt 4700 51835 cost reporting periods beginning on or after October 1, 2011, if there is no provider or supplier of ambulance services located within a 35-mile drive of the CAH, but there is a CAH-owned and operated entity located more than a 35-mile drive from the CAH, the CAH owned and operated entity would be paid at 101 percent of reasonable costs for its ambulance services as long as that entity is the closest provider or supplier of ambulance services to the CAH. We believe this change will continue to allow for sufficient ambulance services to CAHs. We do not have sufficient information or data to determine how many CAH-owned and operated entities can qualify for reasonable cost-based payments under the change. As a result, we are unable to quantify the financial impact of this change for payment based on 101 percent of reasonable costs. However, even those entities that do not qualify for payment based on 101 percent of reasonable costs would be paid for ambulance services under the Medicare ambulance fee schedule. I. Effects of Changes in the Capital IPPS 1. General Considerations For the impact analysis presented below, we used data from the March 2011 update of the FY 2010 MedPAR file and the March 2011 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 2011 update of the most recently available hospital cost report data (FYs 2008 and 2009) 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 are making a ¥1.0 percent documentation and coding adjustment to the national capital rate for FY 2012 in addition to the ¥0.6 percent adjustment established for FY 2008, the ¥0.9 percent adjustment for FY 2009, and the ¥2.9 percent adjustment for FY 2011. This results in a cumulative adjustment factor of 0.9479 that we applied in determining the FY 2012 national capital rate to account for improvements in documentation and coding that do not reflect real changes in case mix under the MS–DRGs. We note that we applied a ¥2.6 percent documentation and coding adjustment to the Puerto Rico-specific capital rate in FY 2011, which reflects the entire amount of our current estimate of the effects of documentation for FYs 2008 and 2009 that do not reflect real changes in casemix under the MS–DRGs. Therefore, we are not adjusting the Puerto Rico-specific capital rate in FY 2012 to account for changes in documentation and coding. 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 E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51836 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations individual hospitals are placed in the wrong category. Using cases from the March 2011 update of the FY 2010 MedPAR file, we simulated payments under the capital IPPS for FY 2011 and FY 2012 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 2012 is as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in 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 2011 and 2012. • We estimate that the Medicare discharges will be approximately 11.8 million in FY 2011 and 12.2 million in FY 2012. • 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 the preamble of this final rule, the update is 1.5 percent for FY 2012. • In addition to the FY 2012 update factor, the FY 2012 capital Federal rate was calculated based on a GAF/DRG budget neutrality factor of 1.0004, and a outlier adjustment factor of 0.9382. As discussed in section III.A.4. of the Addendum to this final rule, an exceptions adjustment factor is not necessary in FY 2012 because there are no longer any hospitals eligible to receive special exceptions payments in FY 2012. However, the special exceptions adjustment factor was not built permanently into the capital rate; that is, was not applied cumulatively. Therefore, because there will be no special exceptions payments in FY 2012, we are only applying an adjustment to restore the special exceptions adjustment that was applied to the FY 2011 capital rate, that is, 1.0004 (calculated as 1/0.9996). VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 • For FY 2012, as discussed above and in section V.E. of the preamble to this final rule, we are applying a cumulative 0.9479 adjustment in determining the FY 2012 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. This cumulative adjustment of 0.9479 reflects the additional ¥1.0 percent adjustment in FY 2012 for the effects of documentation and coding in FYs 2008 and 2009. 2. Results We used the actuarial model described above to estimate the potential impact of our changes for FY 2012 on total capital payments per case, using a universe of 3,419 hospitals. As described above, the individual hospital payment parameters are taken from the best available data, including the March 2011 update of the FY 2010 MedPAR file, the March 2011 update to the PSF, and the most recent cost report data from the March 2011 update of HCRIS. In Table III, we present a comparison of estimated total payments per case for FY 2011 and estimated total payments per case for FY 2012 based on the FY 2012 payment policies. Column 2 shows estimates of payments per case under our model for FY 2011. Column 3 shows estimates of payments per case under our model for FY 2012. Column 4 shows the total percentage change in payments from FY 2011 to FY 2012. 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 2012 are expected to increase as compared to capital payments per case in FY 2011. The capital rate for FY 2012 will increase approximately 0.34 percent as compared to the FY 2011 capital rate. The changes to the GAFs are expected to result, on average, in a slight decrease in capital payments for most regions with the certain exceptions. The regional variations in the estimated change in capital payments are consistent with the changes in payments due to changes in the wage index (and policies affecting the wage index) shown in Table I in section I of this Appendix. We also are estimating a slight increase in outlier payments in FY 2012 as compared to FY 2011. This is primarily because, based on the FY 2010 claims from the March 2011 update of the MedPAR file, we are currently estimating that FY 2011 capital outlier payments are slightly less the projected percentage of 5.96 percent that we used to determine the outlier offset that we applied in determining the FY 2011 capital Federal rate. PO 00000 Frm 00362 Fmt 4701 Sfmt 4700 The net impact of these changes, as discussed above, is an estimated 1.8 percent change in capital payments per discharge from FY 2011 to FY 2012 for all hospitals (as shown below in Table III). The geographic comparison shows that, on average, all hospitals, urban and rural, are expected to experience an increase in capital IPPS payments per case in FY 2012 as compared to FY 2011. Capital IPPS payments per case for urban hospitals are estimated to increase 1.8 percent, while rural hospitals are expected to experience a 1.2 percent increase. The comparisons by region show that all regions will experience, on average, increases in capital IPPS payments. For urban areas, the estimated increase in capital payments per discharge from FY 2011 to FY 2012 ranges from a 1.0 percent increase for the East North Central and East South Central urban regions to a 5.8 percent increase for the New England urban region. As discussed above, the New England urban region is estimated to have a larger than average increase in capital payments per case in FY 2012 as compared to FY 2011 due to the application of a rural floor. For rural regions, the estimated percent increase in capital payments per discharge from FY 2011 to FY 2012 ranges from a 0.7 percent increase for the East North Central rural region to a 2.6 percent increase for the Pacific rural region. By type of ownership, voluntary hospitals and government hospitals are estimated to experience a 1.8 percent increase in capital payments per case; and proprietary hospitals are estimated to experience a 1.6 percent increase in capital payments per case from FY 2011 to FY 2012. Section 1886(d)(10) of the Act established the MGCRB. Hospitals may apply for reclassification for purposes of the wage index for FY 2012. 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 2012, we show the average capital payments per case for reclassified hospitals for FY 2012. All reclassified and nonreclassified hospitals are expected to experience an increase in capital payments in FY 2012 as compared to FY 2011. Urban reclassified hospitals are estimated to experience an increase of 1.7 percent, while urban nonreclassified are estimated to experience the largest increase of 1.9 percent. Rural reclassified hospitals are estimated to experience an increase of 1.4 percent, while rural nonreclassified hospitals are estimated to have a 0.8 percent increase in capital payments per case. Other reclassified hospitals (that is, hospitals reclassified under section 1886(d)(8)(B) of the Act) are expected to experience an increase of 0.5 percent in capital payments from FY 2011 to FY 2012. E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 51837 TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE [FY 2011 payments compared to FY 2012 payments] Average FY 2011 payments/ case Average FY 2012 payments/ case 3,423 1,371 1,127 925 2,498 632 782 449 430 205 925 320 348 152 58 47 786 865 774 542 824 664 711 762 842 993 542 433 500 536 613 656 800 882 787 549 839 675 724 775 856 1,015 549 439 505 543 621 664 1.8 1.9 1.7 1.2 1.8 1.6 1.9 1.7 1.6 2.1 1.2 1.3 1.0 1.3 1.2 1.2 2,498 120 320 380 401 153 169 366 159 380 50 925 23 69 165 120 170 99 183 66 29 1 824 862 877 770 800 729 816 779 847 983 378 542 721 554 529 574 498 570 484 575 685 163 839 912 890 781 808 737 830 796 861 1,004 388 549 728 562 536 577 501 581 491 581 703 166 1.8 5.8 1.4 1.6 1.0 1.0 1.8 2.1 1.7 2.2 2.5 1.2 1.0 1.4 1.3 0.4 0.7 1.8 1.4 1.1 2.6 1.8 3,423 1,384 1,135 904 786 864 774 544 800 881 787 550 1.8 1.9 1.7 1.2 2,391 792 240 671 784 1,112 682 795 1,137 1.7 1.5 2.2 1,547 337 848 590 864 599 1.9 1.4 417 222 475 596 482 604 1.4 1.3 27 134 485 450 488 453 0.5 0.7 827 144 1,057 491 917 806 711 734 935 817 725 745 1.9 1.4 1.9 1.5 2,402 56 33 11 17 828 741 725 557 770 843 750 740 566 784 1.8 1.2 2.0 1.6 1.8 mstockstill on DSK4VPTVN1PROD with RULES2 Number of hospitals By Geographic Location: All hospitals ...................................................................................... Large urban areas (populations over 1 million) ............................... Other urban areas (populations of 1 million of fewer) ..................... Rural areas ....................................................................................... Urban hospitals ................................................................................. 0–99 beds .................................................................................. 100–199 beds ............................................................................ 200–299 beds ............................................................................ 300–499 beds ............................................................................ 500 or more beds ...................................................................... Rural hospitals .................................................................................. 0–49 beds .................................................................................. 50–99 beds ................................................................................ 100–149 beds ............................................................................ 150–199 beds ............................................................................ 200 or more beds ...................................................................... By Region: Urban by Region .............................................................................. New England ............................................................................. Middle Atlantic ........................................................................... South Atlantic ............................................................................ East North Central ..................................................................... East South Central .................................................................... West North Central .................................................................... West South Central ................................................................... Mountain .................................................................................... Pacific ........................................................................................ Puerto Rico ................................................................................ Rural by Region ................................................................................ New England ............................................................................. Middle Atlantic ........................................................................... South Atlantic ............................................................................ East North Central ..................................................................... East South Central .................................................................... West North Central .................................................................... West South Central ................................................................... Mountain .................................................................................... Pacific ........................................................................................ Puerto Rico ................................................................................ By Payment Classification: All hospitals ...................................................................................... Large urban areas (populations over 1 million) ............................... Other urban areas (populations of 1 million of fewer) ..................... Rural areas ....................................................................................... Teaching Status: Non-teaching .................................................................................... Fewer than 100 Residents ............................................................... 100 or more Residents ..................................................................... Urban DSH: 100 or more beds ............................................................................. Less than 100 beds .......................................................................... Rural DSH: Sole Community (SCH/EACH) ......................................................... Referral Center (RRC/EACH) ........................................................... Other Rural: 100 or more beds ............................................................................. Less than 100 beds .......................................................................... Urban teaching and DSH: Both teaching and DSH .................................................................... Teaching and no DSH ...................................................................... No teaching and DSH ...................................................................... No teaching and no DSH ................................................................. Rural Hospital Types: Non special status hospitals ............................................................. RRC/EACH ....................................................................................... SCH/EACH ....................................................................................... Medicare-dependent hospitals (MDH) .............................................. SCH, RRC and EACH ...................................................................... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 PO 00000 Frm 00363 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 Change 51838 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE—Continued [FY 2011 payments compared to FY 2012 payments] Average FY 2011 payments/ case Average FY 2012 payments/ case 323 2,142 332 532 54 827 826 588 475 547 841 841 596 479 550 1.7 1.9 1.4 0.8 0.5 1,985 870 566 802 705 801 816 717 815 1.8 1.6 1.8 358 1,695 1,081 198 1,005 836 667 581 1,026 852 676 590 2.1 1.9 1.4 1.5 Number of hospitals Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY 2012 Reclassifications: All Urban Reclassified ...................................................................... All Urban Non-Reclassified .............................................................. All Rural Reclassified ....................................................................... All Rural Non-Reclassified ................................................................ Other Reclassified Hospitals (Section 1886(d)(8)(B)) ...................... Type of Ownership: Voluntary ........................................................................................... Proprietary ........................................................................................ Government ...................................................................................... Medicare Utilization as a Percent of Inpatient Days: 0–25 .................................................................................................. 25–50 ................................................................................................ 50–65 ................................................................................................ Over 65 ............................................................................................. J. Effects of Payment Rate Changes and Policy Changes Under the LTCH PPS mstockstill on DSK4VPTVN1PROD with RULES2 1. Introduction and General Considerations In section VII. of the preamble and section V. of the Addendum to this final rule, we set forth the annual update to the payment rates for the LTCH PPS for FY 2012. In the preamble, we specify the statutory authority for the provisions that are presented, identify those policies, and present rationales for our decisions as well as alternatives that were considered. In this section of Appendix A to this final rule, we discuss the impact of the changes to the payment rates, factors, and other payment rate policies related to the LTCH PPS that are presented in the preamble of this final rule in terms of their estimated fiscal impact on the Medicare budget and on LTCHs. Currently, our database of 426 LTCHs includes the data for 82 nonprofit (voluntary ownership control) LTCHs and 322 proprietary LTCHs. Of the remaining 22 LTCHs, 13 LTCHs are government-owned and operated and the ownership type of the other 9 LTCHs is unknown. In the impact analysis, we used the rates, factors, and policies presented in this final rule, including the 1.8 percent annual update, which is based on the full increase of the LTCH PPS market basket and the reductions required by sections 1886(m)(3) and (m)(4) of the Act, the update to the MS–LTC–DRG classifications and relative weights, the update to the wage index values and laborrelated share, including the application of a budget neutrality adjustment for changes to the area wage adjustment, and the best available claims and CCR data to estimate the change in payments for FY 2012. The standard Federal rate for FY 2012 is $40,222.05. This rate reflects the 1.8 percent annual update to the standard Federal rate and the area wage level budget neutrality factor of 0.99775, which ensures that the changes in the wage indexes and laborrelated share do not influence estimated aggregate payments. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Based on the best available data for the 426 LTCHs in our database, we estimate that the update to the standard Federal rate for FY 2012 (discussed in section V.A.2. of the Addendum to this final rule) and the changes to the area wage adjustment for FY 2012 (discussed in section V.B. of the Addendum to this final rule), in addition to an estimated increase in HCO payments and an estimated increase in SSO payments, will result in an increase in estimated payments from FY 2011 of approximately $126 million (or about 2.5 percent). Based on the 426 LTCHs in our database, we estimate that the FY 2012 LTCH PPS payments will be approximately $5.257 billion, an increase from FY 2011 LTCH PPS payments which were approximately $5.131 billion. Because the combined distributional effects and estimated changes to the Medicare program payments are approximately $100 million, this final rule is considered a major economic rule, as defined in this section. We note that the approximately $126 million for the projected increase in estimated aggregate LTCH PPS payments from FY 2011 to FY 2012 does not reflect changes in LTCH admissions or casemix intensity in estimated LTCH PPS payments, which also will affect overall payment changes. The projected 2.5 percent increase in estimated payments per discharge from FY 2011 to FY 2012 is attributable to several factors, including the 1.8 percent annual update to the standard Federal rate, and projected increases in estimated HCO and SSO payments. As Table IV shows, the change attributable solely to the final update to the standard Federal rate is projected to result in an increase of 1.6 percent in payments per discharge from FY 2011 to FY 2012, on average, for all LTCHs. Because we are applying an area wage level budget neutrality factor to the standard Federal rate, the update to the wage data and labor-related share does not impact the increase in payments. As discussed in section V.B. of the Addendum to this final rule, we are updating PO 00000 Frm 00364 Fmt 4701 Sfmt 4700 Change the wage index values for FY 2012 based on the most recent available data. In addition, we are decreasing the labor-related share from 75.271 percent to 70.199 percent under the LTCH PPS for FY 2012, based on the most recent available data on the relative importance of the labor-related share of operating and capital costs of the FY 2008based RPL market basket. We also are applying an area wage level budget neutrality factor to the standard Federal rate to ensure that annual changes to the area wage level adjustment (that is, the wage index and laborrelated changes) are budget neutral. We are making an area wage level budget neutrality factor of 0.99775, which reduces the final standard Federal rate by 0.23 percent. Therefore, the changes to the wage data and labor-related share do not result in a change in aggregate LTCH PPS payments. Table IV below shows the impact of the payment rate and policy changes on LTCH PPS payments for FY 2012 presented in this final rule by comparing estimated FY 2011 payments to estimated FY 2012 payments. The projected increase in payments per discharge from FY 2011 to FY 2012 is 2.5 percent (shown in Column 8). This projected increase in payments was attributable to the impacts of the change to the standard Federal rate (1.6 percent in Column 6), as well as the effect of the estimated increase in payments for HCO cases and SSO cases in FY 2012 as compared to FY 2011 (0.5 percent and 0.3 percent, respectively). That is, estimated total HCO payments are projected to increase from FY 2011 to FY 2012 in order to ensure that the estimated HCO payments would be 8 percent of the total estimated LTCH PPS payments in FY 2012. An analysis of the most recent available LTCH PPS claims data (that is, FY 2010 claims data from the March 2011 update of the MedPAR file) indicates that the FY 2011 HCO threshold of $18,785 (as established in the FY 2011 IPPS/LTCH PPS final rule) may result in HCO payments in FY 2011 that fall slightly below the estimated 8 percent. Specifically, we currently estimate that HCO payments will E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations be approximately 7.5 percent of the estimated total LTCH PPS payments in FY 2011. We estimated that the impact of the increase in HCO payments will result in approximately a 0.5 percent increase in estimated payments from FY 2011 to FY 2012, on average, for all LTCHs. Furthermore, in calculating the estimated increase in payments from FY 2011 to FY 2012 for HCO and SSO cases, we increased estimated costs by the applicable market basket percentage increase as projected by our actuaries, which increases estimated payments by 0.3 percent relative to last year. We note that estimated payments for all SSO cases comprised approximately 13 percent of the estimated total LTCH PPS payments, and estimated payments for HCO cases comprised 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 will result in appropriate Medicare payments. 2. Impact on Rural Hospitals For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. As shown in Table IV, we are projecting a 3.5 percent increase in estimated payments per discharge for FY 2012 as compared to FY 2011 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 426 LTCHs) for which complete data were available. The estimated increase in LTCH PPS payments from FY 2011 to FY 2012 for rural LTCHs is primarily due to the higher than average impacts from the changes to the area wage level adjustment, specifically, the reduction to the labor-related share from 75.271 to 70.199. Although we are applying an area wage level budget neutrality factor for changes to the wage indexes and laborrelated share to ensure that there is no change in aggregate LTCH PPS payments due to those changes, we estimated rural hospitals will experience a 0.7 percent increase in payments due to the changes to the area wage level adjustment, as shown in Column 7 below. Rural hospitals generally have a wage index of less than 1; therefore, a decrease to the labor-related share results in their wage index reducing a smaller portion of the standard Federal rate, resulting in an estimated increase in payments in FY 2012 as compared to FY 2011. 3. Anticipated Effects of LTCH PPS Payment Rate Changes and Policy Changes a. Budgetary Impact Section 123(a)(1) of the BBRA requires that the PPS developed for LTCHs ‘‘maintain VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 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 above in section I.J.1. of this Appendix, we project an increase in aggregate LTCH PPS payments in FY 2012 of approximately $126 million (or 2.5 percent) based on the 426 LTCHs in our database. b. Effects of Requirements for LTCH Quality Reporting Program In section VII.C. of the preamble of this final rule, we discuss our requirements for LTCHs to report quality data under the LTCH quality reporting program. As set forth at section 1886(m)(5)(A) of the Act, beginning with FY 2014, the Secretary must reduce by 2.0 percentage points any annual update to the standard Federal rate for discharges for any LTCH which does not comply with the LTCH quality data submission requirements. In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26076), we estimated that should we adopt the proposed requirements for the LTCH quality reporting program for FY 2014, few LTCHs would not receive the full payment update in any fiscal year as a result of failure to comply with the quality reporting program that has been mandated by section 3004 of the Affordable Care Act. We stated this because we believe that most LTCHs will see the new quality reporting program as an important step in improving the quality of care patients receive in these facilities. We also believe that most LTCHs will quickly and easily adapt to this new quality reporting program and find that the benefits of this program outweigh the burdens. At this time, information is not available to determine the precise number of LTCHs that will receive the 2-percent reduction to the annual update to the standard Federal rate for discharges due to noncompliance with the requirements of section 3004 of the Affordable Care Act. At this time, we have no way to estimate how many LTCHs will fully comply with the LTCH quality reporting program. In section VII.C. of the preamble of this final rule, we are adopting three quality reporting measures for LTCHs for FY 2014: (1) Catheter-Associated Urinary Tract Infections (CAUTI); (2) Central Line CatheterAssociated Blood Stream Infection Event (CLABSI); and (3) Pressure Ulcers that are New or Have Worsened. In the FY 2012 IPPS/ LTCH PPS proposed rule (76 FR 26076), we estimated that the total LTCH costs to report these data, including NHSN registration and training for the CAUTI and CLABSI quality measures; data submission for all three measures, and monitoring data submission would be $1,128,440. Comment: Several commenters expressed concern over the potential for negative financial implications and believed that large burdens would be imposed by requiring the PO 00000 Frm 00365 Fmt 4701 Sfmt 4700 51839 reporting of CLABSI and CAUTI measures to the CDC via NHSN. Response: We wish to minimize any burdens associated with the LTCH quality reporting program. We believe that using the NHSN minimizes the potential reporting burdens on LTCHs. We note that the CDC estimates that 200 LTCHs out of a total of 435 certified LTCHs currently submit HAI data to the CDC via NHSN. This means that 46 percent of LTCHs are already enrolled in NHSN, are familiar with the data collection mechanism, and have knowledge of the submission processes required by the CDC. For LTCHs that currently report both measures using the NHSN, there will be no additional burden. For LTCHs that currently report only one of the HAIs to NHSN (for example, an LTCH that reports CAUTI to NHSN, but does not report CLABSI), there will be only modest additional burdens as a result of new LTCH quality reporting program. Because these LTCHs are currently reporting data to NHSN for other purposes, they have already registered with the NHSN and taken the mandatory training. In addition, these LTCHs should already have staff members whom are familiar with the reporting procedures used by NHSN. LTCHs that do not already report information to NHSN will incur the most additional burden. This burden would consist of the following: (1) Registration with the NHSN; (2) Mandatory NHSN training (which is estimated to take approximately 4–5 hours); (3) LTCH training of administrative staff on how to transmit data to the NHSN; and (4) Quarterly reporting time. NHSN does not charge a fee for registration or the submission of data. The mandatory training is also free. This training must be taken before the LTCH can become a registered user. The training must be taken by an administrator, but this may be a person such as an infection control specialist, Director of Nursing, or another person associated with the LTCH’s quality reporting program. Only one person is required to take the NHSN mandatory training in order for the LTCH to become registered. Once the LTCH is registered with the NHSN, it may wish to train other members of the staff about the use of the NHSN system. Each LTCH may decide how many additional staff should be trained. However, it is not likely that more than a few staff members per LTCH will need to be trained on the use of the NHSN system. The new quality reporting program requires that each LTCH must collect the CLABSI and CAUTI data to submit to NHSN. However, the collection of data pertaining to infectious diseases incurred by patients in an LTCH is an important part of safe and effective patient care. We believe that most, if not all, LTCHs already collect and record data pertaining to CAUTI, CLABSI, and pressure ulcers as a part of their safe and effective patient care. This belief is supported by research and environmental scans which have been performed by our measure developer contractor, as well as statements by LTCH providers during open door forums and during TEP discussions. Therefore, we E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 51840 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations do not believe that there will be any significant additional burden related to data collection for the three quality measures. We anticipate that the amount of time that will be needed by each LTCH to report the data collected to the NHSN will be minimal for several reasons. First, these data will be aggregated and reported at intervals. Secondly, based on statistics provided by the CDC, we believe that only a small percentage of patients admitted to LTCHs will experience one of these serious HAIs. We estimate that there may be approximately six CAUTI and six CLABSI events per LTCH per month. This equates to approximately 144 HAI events per LTCH per year. We estimate that it will take approximately 15 minutes of administrative data entry time per submission to submit these data to NHSN. If the data are aggregated and submitted once per month, the time required of an administrative data entry person will be 3 hours per month. If the average wage of an administrative assistant is $20.57, the estimated cost to an LTCH for the monthly submission of the CAUTI and CLABSI data will be $61.71, or $740.52 per LTCH per year. Comment: One commenter recommended that hospitals receive some payment to mitigate the additional cost associated with reporting this information. Response: The Affordable Care Act amended the Act to require the Secretary to implement quality reporting programs in settings that have not been required to do so in the past, including LTCHs. As noted above, we wish to minimize any burdens associated with the LTCH quality reporting program. However, the Act does not provide for additional payments to LTCHs for quality data reporting. In addition, by using NHSN and a subset of the CARE data item set, we are attempting to minimize the burden of the LTCH quality reporting program by using data submission methods that have been used or are being used by some LTCHs. After consideration of the public comments we received, we are finalizing the three quality reporting measures, namely (1) Catheter-Associated Urinary Tract Infections (CAUTI); (2) Central Line CatheterAssociated Blood Stream Infection Event (CLABSI); and (3) Pressure Ulcers that are New or Have Worsened as proposed for the FY 2014 payment determination. At this time, the data reporting mechanism for transferring pressure ulcer data to CMS remains under development. As discussed elsewhere in the preamble to this final rule, we expect the data reporting mechanism to be used will be a subset of the CARE data item set. Upon completion of the pressure ulcer assessment subset of the CARE data item set, a PRA package will be published in the FEDERAL REGISTER, in which CMS will state burden estimates related to the quality measure entitled ‘‘Pressure Ulcers that are New or Have Worsened.’’ Additionally, CMS will release further details and specifications regarding the data collection mechanism via the CMS Web site by no later than January 31, 2012. VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 c. Impact of Application of LTCH Moratorium on the Increase in Beds at Section 114(d)(1)(B) of Public Law 110–173 (MMSEA) to LTCHs and LTCH Satellite Facilities Established or Classified as Such Under Section 114(d)(1)(B) of Public Law 110–173 As discussed in section VII.F. of the preamble of this final rule, at § 412.23(e)(8), for the period beginning October 1, 2011, and ending December 28, 2012, we are applying the moratorium on the increase in the number of beds under section 114(d)(1)(B) of the MMSEA, as specified in § 412.23(e)(7), to LTCHs and LTCH satellite facilities that were established or classified during the period after December 29, 2007 and ending September 30, 2011, under one of the exceptions to the moratorium at section 114(d)(2) of the MMSEA, as set forth in paragraph (e)(6)(ii) of § 412.23. The final regulation precludes a LTCH or LTCH satellite facility that was developed under an exception to the moratorium on the establishment of new LTCHs and LTCH satellite facilities from increasing the number of Medicare-certified beds beyond the number certified by Medicare on October 1, 2011. Approximately 50 LTCHs and 8 LTCH satellite facilities were developed under the exceptions at § 412.23(e)(6)(ii); and under the moratorium at section 114(d)(4) of the MMSEA, which solely applied to ‘‘existing’’ LTCHs and LTCH satellite facilities, additional beds may have been added to these LTCHs and LTCH satellite facilities since establishment. Under the new regulation at § 412.23(e)(8), these ‘‘new’’ LTCHs and LTCH satellite facilities will also be subject to the moratorium on bed increases. Because additional increases in the number of LTCH beds in these facilities could result in added costs to the Medicare program, the impact of precluding additional growth in the number of Medicare-certified beds in these facilities is expected to result in no additional spending under the Medicare program from these LTCHs and LTCH satellite facilities. d. Impact of the Clarification to the Greater Than 25 Day Average Length of Stay Requirement for LTCHs In section VII.E.5. of the preamble of this final rule, we present two clarifications to our existing policy for determining whether a hospital is meeting the greater than 25 day average length of stay requirement for payment under the LTCH PPS. First, we are clarifying and revising the regulations at § 412.23(e)(3)(iv) dealing with the average length of stay determination when there is a change of ownership of either a hospital seeking to qualify as an LTCH or of an existing LTCH. Second, we described and are clarifying our existing policy regarding the inclusion of Medicare Advantage days in the average length of stay calculation. Because typically LTCHs track the lengths of stay of their Medicare patients on an ongoing basis for purposes of maintaining their LTCH status, and Medicare contractors are already tasked with evaluating each LTCH’s average length of stay, we do not believe that there is any actual impact resulting from the clarification of these existing policies nor do PO 00000 Frm 00366 Fmt 4701 Sfmt 4700 they impose any additional burdens on either LTCHs or Medicare contractors. e. Impact on Providers The basic methodology for determining a per discharge LTCH PPS payment is set forth in § 412.515 through § 412.536. In addition to the basic MS–LTC–DRG payment (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 2012, it is necessary to estimate payments per discharge for FY 2011 using the rates, factors (including the FY 2011 GROUPER (Version 28.0), and relative weights and the policies established in the FY 2011 IPPS/ LTCH PPS final rule (75 FR 50364 through 50400 and 50442 through 50449). It is also necessary to estimate the payments per discharge that would have been made under the LTCH PPS rates, factors, policies, and GROUPER (Version 29.0) for FY 2012 (as discussed in VII. of the preamble and section V. of the Addendum to this final rule). These estimates of FY 2011 and FY 2012 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 FY 2011 payments to estimated FY 2012 payments (on a per discharge basis) for each category of LTCHs. Hospital groups were based on characteristics provided in the OSCAR data, FY 2008 through FY 2009 cost report data in HCRIS, and PSF data. Hospitals with incomplete characteristics were grouped into the ‘‘unknown’’ category. Hospital groups included the following: • Location: large urban/other urban/rural. • Participation date. • Ownership control. • Census region. • Bed size. To estimate the impacts of the final payment rates and policy changes among the various categories of existing providers, we used LTCH cases from the FY 2010 MedPAR file to estimate payments for FY 2011 and to estimate payments for FY 2012 for 426 LTCHs. We believe that the discharges based on the FY 2010 MedPAR data for the 426 LTCHs in our database, which includes 322 proprietary LTCHs, provide sufficient representation in the MS–LTC–DRGs containing discharges for patients who received LTCH care for the most commonly treated LTCH patients’ diagnoses. f. 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 2010 MedPAR files. For modeling estimated LTCH PPS payments for FY 2011, we applied the FY 2011 standard Federal rate (that is, $39,599.95, under which LTCH discharges occurring on or after October 1, E:\FR\FM\18AUR2.SGM 18AUR2 51841 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 2010, to September 30, 2011 are paid). For modeling estimated LTCH PPS payments for FY 2012, we applied the FY 2012 standard Federal rate of $40,222.05, which will be effective for LTCH discharges occurring on or after October 1, 2011, and through September 30, 2012. The final FY 2012 standard Federal rate of $40,222.05 includes the application of an area wage level budget neutrality factor of 0.99775 (as discussed in section VII.E.4. of the preamble of this final rule). Furthermore, in modeling estimated LTCH PPS payments for both FY 2011 and FY 2012 in this impact analysis, we applied the FY 2011 and the FY 2012 adjustments for area wage levels and the COLA for Alaska and Hawaii. Specifically, we adjusted for differences in area wage levels in determining estimated FY 2011 payments using the current LTCH PPS labor-related share of 75.271 percent (75 FR 50445) and the wage index values established in the Tables 12A and 12B of the Addendum to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50627 through 50646). We also applied the FY 2011 COLA factors shown in the table in section V.B.5. of the Addendum to that final rule (75 FR 50446) to the FY 2011 nonlaborrelated share (24.729 percent) for LTCHs located in Alaska and Hawaii. Similarly, we adjusted for differences in area wage levels in determining the estimated FY 2012 payments using the LTCH PPS FY 2012 labor-related share of 70.199 percent and the FY 2012 wage index values presented in Tables 12A and 12B listed in section VI. of the Addendum to this final rule (and available via the Internet). We also applied the FY 2012 COLA factors shown in the table in section V.B.5. of the Addendum to the FY 2011 IPPS/LTCH PPS final rule to the FY 2012 nonlabor-related share (29.801 percent) for LTCHs located in Alaska and Hawaii. As discussed above, our impact analysis reflects an estimated change in payments for SSO cases, as well as an estimated increase in payments for HCO cases (as described in section V.C. of the Addendum to this final rule). In modeling final payments for SSO and HCO cases in FY 2012, we are applying an inflation factor of 1.057 (determined by OACT) to the estimated costs of each case determined from the charges reported on the claims in the FY 2010 MedPAR files and the best available CCRs from the March 2011 update of the PSF. Furthermore, in modeling estimated LTCH PPS payments for FY 2012 in this impact analysis, we used the FY 2012 fixed-loss amount of $17,931 (as discussed in section V. of the Addendum to this final rule). These impacts reflect the estimated ‘‘losses’’ or ‘‘gains’’ among the various classifications of LTCHs from the FY 2011 to FY 2012 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 FY 2011 (as described above). • The fifth column shows the estimated payment per discharge for FY 2012 (as described above). • The sixth column shows the percentage change in estimated payments per discharge from FY 2011 to FY 2012 due to the update to the standard Federal rate (as discussed in section V.A.2. of the Addendum to this final rule). • The seventh column shows the percentage change in estimated payments per discharge from FY 2011 to FY 2012 for changes to the area wage level adjustment (that is, the final wage indexes and laborrelated share), including the application of an area wage level budget neutrality factor (as discussed in section V.B.5. of the Addendum to the final rule). • The eighth column shows the percentage change in estimated payments per discharge from FY 2011 (Column 4) to FY 2012 (Column 5) for all changes (and includes the effect of estimated changes to HCO and SSO payments). TABLE IV—IMPACT OF PAYMENT RATE AND POLICY CHANGES TO LTCH PPS PAYMENTS FOR FY 2012 [Estimated FY 2011 payments compared to estimated FY 2012 payments*] Number of LTCH PPS cases Average FY 2011 LTCH PPS payment per case Average FY 2012 LTCH PPS payment per case 1 (1) mstockstill on DSK4VPTVN1PROD with RULES2 Number of LTCHs (2) (3) (4) (5) (6) All Providers ....................................... By Location: Rural ........................................... Urban .......................................... Large ........................................... Other ........................................... By Participation Date: Before Oct. 1983 ........................ Oct. 1983–Sept. 1993 ................. Oct. 1993–Sept. 2002 ................. After October 2002 ..................... Unknown Participation Date ....... By Ownership Type: Voluntary ..................................... Proprietary .................................. Government ................................ Unknown Ownership Type ......... By Region: New England .............................. Middle Atlantic ............................ South Atlantic .............................. East North Central ...................... East South Central ..................... VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 Percent change in estimated payments per discharge from FY 2011 to FY 2012 for changes to the area wage level adjustment with budget neutrality 3 Percent change in payments per discharge from FY 2011 to FY 2012 for all changes 4 (7) LTCH Classification Percent change in estimated payments per discharge from FY 2011 to FY 2012 for the annual update to the federal rate 2 (8) 426 135,100 $37,977 $38,911 1.6 0.0 2.5 26 400 204 196 5,862 129,238 77,420 51,818 33,445 38,182 39,911 35,599 34,366 39,118 40,884 36,478 1.7 1.6 1.6 1.6 0.7 0.0 ¥0.2 0.3 3.5 2.4 2.2 2.8 16 44 186 176 4 5,914 16,673 63,376 48,317 820 33,691 40,019 37,198 38,826 37,558 34,509 41,075 38,085 39,794 38,534 1.6 1.5 1.6 1.6 1.6 ¥0.6 ¥0.2 0.0 0.1 1.5 1.9 2.4 2.4 2.6 4.1 82 322 13 9 19,596 113,085 1,720 699 38,992 37,702 42,710 42,249 40,120 38,596 44,026 43,546 1.6 1.6 1.6 1.6 0.0 0.0 ¥0.2 ¥0.2 2.9 2.4 2.9 2.9 15 30 59 70 29 7,313 7,970 15,577 19,913 8,177 33,726 38,866 41,327 39,857 37,658 34,501 39,802 42,388 40,820 38,635 1.5 1.6 1.5 1.6 1.6 ¥0.6 ¥0.1 0.0 ¥0.5 0.2 1.7 2.3 2.6 2.0 2.8 PO 00000 Frm 00367 Fmt 4701 Sfmt 4700 E:\FR\FM\18AUR2.SGM 18AUR2 51842 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations TABLE IV—IMPACT OF PAYMENT RATE AND POLICY CHANGES TO LTCH PPS PAYMENTS FOR FY 2012—Continued [Estimated FY 2011 payments compared to estimated FY 2012 payments*] Number of LTCHs Number of LTCH PPS cases Average FY 2011 LTCH PPS payment per case Average FY 2012 LTCH PPS payment per case 1 (1) (2) (3) (4) (5) (6) West North Central ..................... West South Central .................... Mountain ..................................... Pacific ......................................... By Bed Size: Beds: 0–24 .................................. Beds: 25–49 ................................ Beds: 50–74 ................................ Beds: 75–124 .............................. Beds: 125–199 ............................ Beds: 200 + ................................ Percent change in estimated payments per discharge from FY 2011 to FY 2012 for changes to the area wage level adjustment with budget neutrality 3 Percent change in payments per discharge from FY 2011 to FY 2012 for all changes 4 (7) LTCH Classification Percent change in estimated payments per discharge from FY 2011 to FY 2012 for the annual update to the federal rate 2 (8) 26 141 32 24 5,903 50,675 6,742 12,830 39,877 33,357 41,479 48,595 40,921 34,176 42,579 49,716 1.6 1.7 1.6 1.5 0.3 0.5 ¥0.4 ¥0.4 2.9 2.9 2.2 1.8 29 199 114 47 23 14 3,667 43,952 36,429 21,072 16,057 13,923 32,708 37,489 38,383 40,614 36,539 37,509 33,554 38,410 39,368 41,622 37,410 38,339 1.7 1.6 1.6 1.6 1.5 1.6 0.5 0.1 0.1 ¥0.3 ¥0.1 0.0 3.1 2.6 2.6 2.2 2.3 2.2 mstockstill on DSK4VPTVN1PROD with RULES2 1 Estimated FY 2012 LTCH PPS payments based on the final payment rates and policy changes presented in the preamble and the Addendum to this final rule. 2 Percent change in estimated payments per discharge from FY 2011 to FY 2012 for the annual update to the standard Federal rate, as discussed in section V.A.2. of the Addendum to this final rule. 3 Percent change in estimated payments per discharge from FY 2011 to FY 2012 for changes to the area wage level adjustment at § 412.525(c) (as discussed in section V.B. of the Addendum to this final rule). 4 Percent change in estimated payments per discharge from FY 2011 LTCH PPS (shown in Column 4) to FY 2012 LTCH PPS (shown in Column 5), including all of the changes presented in the preamble and the Addendum to this final rule. Note, this column, which shows the percent change in estimated payments per discharge for all changes, does not equal the sum of the percent changes in estimated payments per discharge for the annual update to the standard Federal rate (column 6) and the changes to the area wage level adjustment with budget neutrality (Column 7) due to the effect of estimated changes in both estimated payments to SSO cases that are paid based on estimated costs and aggregate HCO payments (as discussed in this impact analysis), as well as other interactive effects that cannot be isolated. g. Results Based on the most recent available data for 426 LTCHs, we have prepared the following summary of the impact (as shown above 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 2.5 percent, on average, for all LTCHs from FY 2011 to FY 2012 as a result of the payment rate and policy changes presented in this final rule, as well as estimated increases in HCO and SSO payments. We note that we updated the standard Federal rate for FY 2012 by 1.8 percent, which is based on the latest estimate of the LTCH PPS market basket increase (2.9 percent), the reduction of 1.0 percentage point for the multifactor productivity adjustment and the 0.1 percentage point reduction required under sections 1886(m)(3) and (m)(4) of the Act. We noted earlier in this section that for most categories of LTCHs, as shown in Table IV (Column 6), the impact of the increase of approximately 1.8 percent for the annual update to the standard Federal rate is projected to result in approximately a 1.6 percent change in estimated payments per discharge for all LTCHs from FY 2011 to FY 2012. Because payments to cost-based SSO cases and a portion of payments to SSO cases that are paid based on the ‘‘blend’’ option of VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 the SSO payment formula at § 412.529(c)(2)(iv) are not affected by the annual update to the standard Federal rate, we estimated that the effect of the 1.8 percent annual update to the standard Federal rate will result in a 1.6 percent increase on estimated aggregate LTCH PPS payments for 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 FY 2011 to FY 2012 for all LTCHs of approximately 2.5 percent (as shown in Table IV) was determined by comparing estimated FY 2012 LTCH PPS payments (using the rates and policies discussed in this final rule) to estimated FY 2011 LTCH PPS payments (as described above in section I.J.1. of this Appendix). (1) 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 FY 2011 to FY 2012 for all hospitals is 2.5 percent for all changes. For rural LTCHs, the percent change for all changes is estimated to be 3.5 percent, while for urban PO 00000 Frm 00368 Fmt 4701 Sfmt 4700 LTCHs, we estimate the increase to be 2.4 percent. Large urban LTCHs are projected to experience an increase of 2.2 percent in estimated payments per discharge from FY 2011 to FY 2012, while other urban LTCHs are projected to experience an increase of 2.8 percent in estimated payments per discharge from FY 2011 to FY 2012, as shown in Table IV. (2) Participation Date LTCHs are grouped by participation date into four categories: (1) Before October 1983; (2) between October 1983 and September 1993; (3) between October 1993 and September 2002; and (4) after October 2002. Based on the most recent available data, the majority (approximately 47 percent) of the LTCH cases are in hospitals that began participating in the Medicare program between October 1993 and September 2002, and are projected to experience nearly the average increase (2.4 percent) in estimated payments per discharge from FY 2011 to FY 2012, 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 lower than average percent increase (1.9 percent) in estimated payments per discharge from FY 2011 to FY 2012, as shown in Table IV. Approximately 4 percent of LTCHs began participating in Medicare before October 1983. The LTCHs in this E:\FR\FM\18AUR2.SGM 18AUR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations category are projected to experience a lower than average increase in estimated payments because of decrease in payments due to the changes to the area wage adjustment. Approximately 10 percent of LTCHs began participating in Medicare between October 1983 and September 1993. These LTCHs are projected to experience a 2.4 percent increase in estimated payments from FY 2011 to FY 2012. LTCHs that began participating in Medicare after October 2002 currently represent approximately 41 percent of all LTCHs, and are projected to experience an average increase (2.6 percent) in estimated payments from FY 2011 to FY 2012. (3) 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 19 percent of LTCHs are identified as voluntary (Table IV). We expect that, for these LTCHs in the voluntary category, estimated FY 2012 LTCH payments per discharge will increase higher than the average (2.9 percent) in comparison to estimated payments in FY 2011 primarily because we project an increase in estimated HCO payments and SSO payments to be higher than the average for these LTCHs. The majority (76 percent) of LTCHs are identified as proprietary and these LTCHs are projected to experience a nearly average increase (2.4 percent) in estimated payments per discharge from FY 2011 to FY 2012. Finally, government-owned and operated LTCHs (3 percent) are also expected to experience a higher than average increase in payments of 2.9 percent in estimated payments per discharge from FY 2011 to FY 2012. (4) Census Region Estimated payments per discharge for FY 2012 are projected to increase for LTCHs located in all regions in comparison to FY 2011. Of the 9 census regions, we project that the increase in estimated payments per discharge will have the largest positive impact on LTCHs in the West North Central and West South Central regions (2.9 percent, as shown in Table IV). The estimated percent increase in payments per discharge from FY 2011 to FY 2012 for those regions is largely attributable to the changes in the area wage level adjustment. In contrast, LTCHs located in the New England region are projected to experience the smallest increase in estimated payments per discharge from FY 2011 to FY 2012. The average estimated increase in payments of 1.7 percent for LTCHs in the New England region is primarily due to estimated decreases in payments associated with the area wage level adjustment. (5) Bed Size LTCHs are 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) will experience a 3.1 percent increase in payments due to increases in the area wage adjustment while large LTCHs (200+ beds) will experience a 2.2 percent VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 increase in payments. LTCHs with between 75 and 124 beds and between 125 and 199 beds are expected to experience a slightly below average increase in payments per discharge from FY 2011 to FY 2012 (2.2 percent and 2.3 percent, respectively) primarily due to an estimated decrease in their payments from FY 2011 to FY 2012 due to the area wage level adjustment. 4. Effect on the Medicare Program As noted previously, we project that the provisions of this final rule will result in an increase in estimated aggregate LTCH PPS payments in FY 2012 of approximately $126 million (or approximately 2.5 percent) for the 426 LTCHs in our database. 5. Effect on Medicare Beneficiaries Under the LTCH PPS, hospitals receive payment based on the average resources consumed by patients for each diagnosis. We do not expect any changes in the quality of care or access to services for Medicare beneficiaries under the LTCH PPS, but we continue to expect that paying prospectively for LTCH services will enhance the efficiency of the Medicare program. K. Alternatives Considered 1. General This final rule contains a range of policies. It also provides descriptions of the statutory provisions that are addressed, identifies policies, and presents rationales for our decisions and, where relevant, alternatives that were considered. 2. Alternative Considered for Hospital Inpatient Quality Review (IQR) and ValueBased Purchasing (VBP) Programs: Medicare Spending per Beneficiary Measure In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25896 and 25897 and 76 FR 25927 and 25928), we described our proposed policy for implementing the claims-based Medicare spending per beneficiary measure for the FY 2014 Hospital IQR Program and the claims-based Medicare spending per beneficiary measure for the FY 2014 Hospital VBP Program. In addition, we described an alternative we considered for the Medicare spending per beneficiary measure (76 FR 26080 through 26082). We considered this alternative approach based on the principle that Medicare spending per beneficiary benchmarks for lower quality hospitals should not exceed the benchmarks for higher quality hospitals. This alternative approach was more complex than the approach we are finalizing. Due to its increased complexity, in the proposed rule, we included the discussion of this alternative approach in this section, rather than earlier in the preamble of the proposed rule, for ease of presentation. The approach consisted of setting differential spending benchmarks for different quality score-based cohorts of hospitals and applying an efficiency adjustment to the quality score. We did not receive any public comments on the discussion of an alternative approach to incorporating a Medicare spending per beneficiary measure into the FY 2014 Hospital VBP Program or the Hospital IQR Program. We are finalizing the addition of a Medicare spending per beneficiary measure PO 00000 Frm 00369 Fmt 4701 Sfmt 4700 51843 to the FY 2014 Hospital IQR Program, as described in section IV.A.3.b.(ii)(B) of the preamble to this final rule, and to the FY 2014 Hospital VBP Program, as described in section IV.B.3.b.(iii) of the preamble to this final rule. L. Overall Conclusion 1. Acute Care Hospitals Table I of section I.G. of this Appendix demonstrates the estimated distributional impact of the IPPS budget neutrality requirements for the MS–DRG and wage index changes, and for the wage index reclassifications under the MGCRB. Table I also shows an overall increase of 1.1 percent in operating payments. We estimate that operating payments will increase by approximately $1.13 billion in FY 2012. For FY 2012, we are distributing $250 million to hospitals that qualify to receive additional payment under section 1109 of Public Law 111–152, which is an additional $100 million than what we had distributed under this provision in FY 2011. In addition, we estimate a savings of $21 million associated with the HACs policies in FY 2012, which is an additional $1 million in savings than in FY 2011. We estimate that we will spend $900,000 in new technology add-on payments in FY 2012, which is approximately $17 million less than what we spent in FY 2011. We estimate that low volume payments in FY 2012 will be $5 million more than the low volume payments made in FY 2011. These estimates, added to our FY 2012 operating estimate of $1.13 billion, will result in an increase of $1.22 billion for FY 2012. We estimate that capital payments will experience a 1.8 percent increase in payments per case, as shown in Table III of section I.I. of this Appendix. We project that there would be a $151 million increase in capital payments in FY 2012 compared to FY 2011. The cumulative operating and capital payments should result in a net increase of $1.369 billion to IPPS providers. The discussions presented in the previous pages, in combination with the rest of this final rule, constitute a regulatory impact analysis. 2. LTCHs Overall, LTCHs are projected to experience an increase in estimated payments per discharge in FY 2012. In the impact analysis, we are using the rates, factors, and policies presented in this final rule, including 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 2012. Accordingly, based on the best available data for the 426 LTCHs in our database, we estimate that FY 2012 LTCH PPS payments will increase approximately $126 million (or approximately 2.5 percent). M. Accounting Statements and Tables 1. 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 E:\FR\FM\18AUR2.SGM 18AUR2 51844 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations 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 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 2011 TO FY 2012 Category Transfers Annualized Monetized Transfers. From Whom to Whom $1.369 billion. Total ................... $1.369 billion Federal Government to IPPS Medicare Providers. 2. LTCHs As discussed in section I.J. of this Appendix, the impact analysis for the changes under the LTCH PPS for this final rule projects an increase in estimated aggregate payments of approximately $126 million (or approximately 2.5 percent) for the 426 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 provisions presented in this final rule based on the data for the 426 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 FY 2011 LTCH PPS TO THE FY 2012 LTCH PPS Transfers Annualized Monetized Transfers mstockstill on DSK4VPTVN1PROD with RULES2 Category Positive transfer—Estimated increase in expenditures: $126 million. II. Regulatory Flexibility Act (RFA) Analysis The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small government jurisdictions. We estimate that most hospitals and most other providers and suppliers are small entities as that term is used in the RFA. The great majority of hospitals and most other health care providers and suppliers are small entities, either by being nonprofit VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 organizations or by meeting the SBA definition of a small business (having revenues of less than $7.5 million to $34.5 million in any 1 year). (For details on the latest standards for health care providers, we refer readers to page 33 of the Table of Small Business Size Standards for NAIC 622 found on the SBA Web site at: https://www.sba.gov/ contractingopportunities/sizestandardtopics/ tableofsize/.) 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 will 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 I.J. 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 regulatory flexibility analysis. In the FY 2012 IPPS/ LTCH PPS proposed rule, we solicited public comments on our estimates and analysis of the impact of our proposals on those small entities. We did not receive any public comments. III. Impact on Small Rural Hospitals Section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis for any proposed or final rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we now define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98–21) designated hospitals in certain New England counties as belonging to the adjacent urban area. Thus, for purposes of the IPPS and the LTCH PPS, we continue to classify these hospitals as urban hospitals. (We refer readers to Table I in section I.G. of this Appendix for the quantitative effects of the policy changes under the IPPS for operating costs.) IV. Unfunded Mandates Reform Act Analysis Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2011, that threshold level is approximately $136 million. This final rule will not mandate any requirements for State, local, or tribal governments, nor will it affect private sector costs. PO 00000 Frm 00370 Fmt 4701 Sfmt 4700 V. 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 Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background Section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Under section 1886(e)(5) of the Act, we are required to publish update factors recommended by the Secretary in the proposed and final IPPS rules, respectively. Accordingly, this Appendix provides the recommendations for the update factors for the IPPS national standardized amount, the Puerto Rico-specific standardized amount, the hospital-specific rates for SCHs and MDHs, and the rate-of-increase limits for certain hospitals excluded from the IPPS, as well as LTCHs, IPFs, and IRFs. We also discuss our response to MedPAC’s recommended update factors for inpatient hospital services. II. Inpatient Hospital Update for FY 2012 A. FY 2012 Inpatient Hospital Update Section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act, sets the applicable percentage increase under the IPPS for FY 2012 as equal to the rate-of-increase in the hospital market basket for IPPS hospitals in all areas, subject to a reduction of 2.0 percentage points if the hospital fails to submit quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act, and then subject to an adjustment based on changes in economy-wide productivity and an additional reduction of 0.1 percentage point. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 3401(a) of the Affordable Care Act, state that the application of the multifactor productivity adjustment and the additional FY 2012 adjustment of 0.1 percentage point may result in the applicable percentage increase being less than zero. In accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, in section IV.K.3. of the preamble of the proposed rule, based on IGI’s first quarter 2011 forecast of multifactor productivity (MFP), we proposed a MFP adjustment (the 10-year moving average of MFP for the period ending FY 2012) of 1.2 percent. Therefore, in the FY 2012 IPPS/LTCH PPS proposed rule, based on IGI’s first quarter 2011 forecast of the FY 2012 market basket increase, we proposed an applicable percentage increase to the FY 2012 operating standardized amount of 1.5 percent (that is, the FY 2012 estimate of the market basket rate-of-increase of 2.8 percent less an E:\FR\FM\18AUR2.SGM 18AUR2 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations adjustment of 1.2 percentage points for economy-wide productivity and less 0.1 percentage point) for hospitals in all areas, provided the hospital submits quality data in accordance with section 1886(b)(3)(B)(viii) of the Act and our rules. For hospitals that fail to submit quality data, we proposed an applicable percentage increase to the operating standardized amount of ¥0.5 percent (that is, the FY 2012 estimate of the market basket rate-of increase of 2.8 percent less 2.0 percentage points for failure to submit quality data, less an adjustment of 1.2 percentage points for economy-wide productivity, and less an additional adjustment of 0.1 percentage point). For this final rule, in accordance with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) of the Affordable Care Act, based on IGI’s second quarter 2011 forecast of MFP, we are finalizing a MFP adjustment (the 10-year moving average of MFP for the period ending FY 2012) of 1.0 percent for FY 2012. Based on IGI’s second quarter 2011 forecast of the FY 2012 market basket increase, we are finalizing an applicable percentage increase to the FY 2012 operating standardized amount of 1.9 percent (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent less an adjustment of 1.0 percentage point for economy-wide productivity and less 0.1 percentage point) for hospitals in all areas, provided the hospital submits quality data in accordance with section 1886(b)(3)(B)(viii) of the Act and our rules. For hospitals that fail to submit quality data, we are making an applicable percentage increase to the operating standardized amount of ¥0.1 percent (that is, the FY 2012 estimate of the market basket rate-of increase of 3.0 percent less 2.0 percentage points for failure to submit quality data, less an adjustment of 1.0 percentage point for economy-wide productivity, and less an additional adjustment of 0.1 percentage point). mstockstill on DSK4VPTVN1PROD with RULES2 B. Update for SCHs and MDHs for FY 2012 Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2012 applicable percentage increase in 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). Therefore, the update to the hospital specific rates for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the applicable percentage increase to the hospital-specific rates applicable to SCHs and MDHs for FY 2012 is 1.9 percent for hospitals that submit quality data or ¥0.1 percent for hospitals that fail to submit quality data. C. FY 2012 Puerto Rico Hospital Update Section 401(c) of Public Law 108–173 amended section 1886(d)(9)(C)(i) of the Act and states that, for discharges occurring in a fiscal year (beginning with FY 2004), the Secretary shall compute an average standardized amount for hospitals located in any area of Puerto Rico that is equal to the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 average standardized amount computed under subclause (I) for FY 2003 for hospitals in a large urban area (or, beginning with FY 2005, for all hospitals in the previous fiscal year) increased by the applicable percentage increase under subsection (b)(3)(B) for the fiscal year involved. Therefore, the update to the Puerto Rico-specific operating standardized amount is subject to the applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act as amended by sections 3401(a) and 10319(a) of the Affordable Care Act (that is, the same update factor as for all other hospitals subject to the IPPS). Accordingly, the applicable percentage increase to the Puerto Ricospecific standardized amount for FY 2012 is 1.9 percent. 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 (and codified at section 1886(m)(1) of the Act), 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. In this final rule, we are providing our current estimate of the FY 2012 IPPS operating market basket percentage increase (3.0 percent) to update the target limits for children’s hospitals, cancer hospitals, and RNHCIs for FY 2012. For FY 2012, 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 2012 based on the full proposed LTCH PPS market basket increase estimate (2.9 percent). The annual update also includes the requirement at section 1886(m)(3)(A)(i) of the Act to reduce the annual update by the economy-wide productivity adjustment described in section 1886(b)(3)(B)(xi)(ii) of the Act, which is currently estimated to be 1.0 percent. In addition, section 1886(m)(3)(A)(ii) of the Act requires that any annual update for FY 2012 be reduced by the ‘‘other adjustment’’ at section 1886(m)(4)(C) of the Act, which is 0.1 percentage point. Accordingly, the update factor to the standard Federal rate for FY 2012 is 1.8 percent (that is, we are applying a factor of 1.018 in determining the LTCH PPS standard Federal rate for FY 2012). PO 00000 Frm 00371 Fmt 4701 Sfmt 4700 51845 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. In the RY 2012 IPF PPS final rule (76 FR 26434 through 26435), we extended the IPF PPS RY 2012 by 3 months (a total of 15 months instead of 12 months) through September 30, 2012. Based on IGI’s first quarter 2011 forecast, with history through the fourth quarter of 2010, the projected 15-month market basket update based on the FY 2008-based RPL market basket for the 15-month RY 2012 (July 1, 2011 through September 30, 2012) is 3.2 percent. In accordance with section 1886(s)(2)(A)(ii) of the Act, which requires the application of an ‘‘other adjustment,’’ described in section 1886(s)(3) of the Act (specifically, section 1886(s)(3)(A) for RYs 2011 and 2012), that reduces the update to the IPF PPS base rate for the rate year beginning in CY 2011, we adjusted the IPF PPS update by 0.25 percentage point for RY 2012. Therefore, we applied the 15-month FY 2008-based RPL market basket increase of 3.2 percent for RY 2012, which was then adjusted by the ‘‘other adjustment’’ of 0.25 percentage point. 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). Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(ii) of the Act require the application of a 0.1 percentage point reduction to the market basket increase factor for FYs 2012 and 2013. In addition, section 1886(j)(3)(C)(ii)(I) of the Act requires the application of an economy-wide productivity adjustment. As published elsewhere in this Federal Register, in accordance with section 1886(j)(3)(C) of the Act, as amended by section 3401(d) of the Affordable Care Act, we base the FY 2012 market basket update, used to determine the applicable percentage increase for the IRF payments, on the second quarter 2011 forecast of the FY 2008-based RPL market basket (estimated to be 2.9 percent). This percentage increase is then reduced by the MFP adjustment (the 10-year moving average of MFP for the period ending FY 2012) of 1.0 percent, which was calculated based on IGI’s second quarter 2011 forecast. Following application of the productivity adjustment, the applicable percentage increase is then reduced by 0.1 percentage point, as required by section 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(ii) of the Act, as added and amended by sections 3401 (d) of the Affordable Care Act. Therefore the final FY 2012 IRF update is 1.8 percent (2.9 percent market basket update less 1.0 percentage point MFP adjustment less 0.1 percentage point legislative adjustment). III. Secretary’s Final Recommendations MedPAC is recommending an inpatient hospital update equal to one percent for FY E:\FR\FM\18AUR2.SGM 18AUR2 51846 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 2012. MedPAC’s rationale for this update recommendation is 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 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 current law, we are recommending an applicable percentage increase to the standardized amount of 1.9 percent (that is, the FY 2012 estimate of the market basket rate-of-increase of 3.0 percent less an MFP adjustment of 1.0 percentage point and less 0.1 percentage point). We are recommending that the same applicable percentage increase apply to SCHs and MDHs and the Puerto Rico-specific standardized amount. In addition to making a recommendation for IPPS hospitals, in accordance with section 1886(e)(4)(A) of the Act, we are recommending update factors for all other types of hospitals. Consistent with our update for these facilities, we are recommending an update for children’s hospitals, cancer hospitals, and RNHCIs of 3.0 percent. For FY 2012, consistent with policy set forth in section VII. of the preamble of this final rule, we are recommending an update of 1.8 percent to the LTCH PPS standard Federal rate. In addition, consistent with the update specified in the FY 2012 IRF PPS final rule (as described above), we are recommending an update of 1.8 percent (that is, the market basket increase factor of 2.9 percent less 1.0 percentage point for the MFP adjustment and less 0.1 percentage point in accordance with sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(ii) of the Act) to the IRF PPS Federal rate for FY 2012. Finally, consistent with the update specified in the VerDate Mar<15>2010 16:07 Aug 17, 2011 Jkt 223001 FY 2012 IPF PPS final rule (as described above), we are recommending an update of 3.2 percent reduced by 0.25 percentage point to the IPF PPS Federal rate for RY 2012 for the Federal per diem payment amount. IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare In its March 2011 Report to Congress, MedPAC assessed the adequacy of current payments and costs, and the relationship between payments and an appropriate cost base. MedPAC recommended an update to the hospital inpatient rates equal to one percent. MedPAC expects Medicare margins to remain low in 2012. At the same time though, MedPAC’s analysis finds that efficient hospitals have been able to maintain positive Medicare margins while maintaining a relatively high quality of care. MedPAC also recommended that Congress should require the Secretary to make adjustments to inpatient payment rates in future years to recover all overpayments due to documentation and coding improvements. MedPAC noted that priority should be given to preventing future overpayments. Response: With regard to MedPAC’s recommendation of an update to the hospital inpatient rates equal to one percent, for FY 2012, as discussed above, sections 3401(a) and 10319(a) of the Affordable Care Act amended section 1886(b)(3)(B) of the Act. Section 1886(b)(3)(B) of the Act, as amended by these sections, sets the requirements for the FY 2012 applicable percentage increase. Therefore, we are establishing an applicable percentage increase for FY 2012 of 1.9 percent, provided the hospital submits quality data, consistent with these statutory requirements. Similar to our response last year, we agree with MedPAC that hospitals should control costs rather than have Medicare PO 00000 Frm 00372 Fmt 4701 Sfmt 9990 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. With regard to MedPAC’s recommendation that Congress should require the Secretary to make adjustments to inpatient payment rates in future years to recover all overpayments due to documentation and coding improvements, we refer the reader to section III. D. of the preamble to this final rule for a complete discussion on the FY 2012 MS– DRG documentation and coding adjustment. In section III. D. of the preamble to this final rule, we are making a prospective adjustment of 2.0 percent and a recoupment of 2.9 percent to the FY 2012 inpatient payment rates to recover overpayments due to documentation and coding improvements. We note that any recoupments for overpayments due to documentation and coding improvements beyond the authority of section 7(b)(1)(B) of Public Law 110–90 would require additional changes to current law by Congress. Therefore, without a change to current law, our ability to recoup all overpayments due to documentation and coding improvements is limited. 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 address public comments related to MedPAC’s recommendation of an update to the hospital inpatient rates equal to 1.0 percent in section II.D. of the preamble to this final rule. [FR Doc. 2011–19719 Filed 8–1–11; 4:15 pm] BILLING CODE 4120–01–P E:\FR\FM\18AUR2.SGM 18AUR2

Agencies

[Federal Register Volume 76, Number 160 (Thursday, August 18, 2011)]
[Rules and Regulations]
[Pages 51476-51846]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19719]

[[Page 51475]]

Vol. 76

Thursday,

No. 160

August 18, 2011

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 412, 413 and 476

Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and FY 2012 Rates; Hospitals' FTE Resident Caps for
Graduate Medical Education Payment; Final Rule

Federal Register / Vol. 76 , No. 160 / Thursday, August 18, 2011 /
Rules and Regulations

[[Page 51476]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412, 413, and 476

[CMS-1518-F; CMS-1430-F]
RIN 0938-AQ24; RIN 0938-AQ92

Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and FY 2012 Rates; Hospitals' FTE Resident Caps for
Graduate Medical Education Payment

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

ACTION: Final rules.

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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 statutory
provisions contained in the Patient Protection and Affordable Care Act
and the Health Care and Education Reconciliation Act of 2010
(collectively known as the Affordable Care Act) and other legislation.
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 implementing
certain statutory changes made by the Affordable Care Act. In addition,
we are finalizing an interim final rule with comment period that
implements section 203 of the Medicare and Medicaid Extenders Act of
2010 relating to the treatment of teaching hospitals that are members
of the same Medicare graduate medical education affiliated groups for
the purpose of determining possible full-time equivalent (FTE) resident
cap reductions.

DATES: Effective dates: These final rules are effective on October 1,
2011, except for the provisions of Sec. 412.230(d)(5), which are
effective September 1, 2011. Effective July 29, 2011, the interim rule
published March 14, 2011, at 76 FR 13515, is confirmed as final without
change.
Applicability dates: 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 is applicable beginning on or after
October 1, 2011. The payment policy and the annual payment rates for
inpatient hospital services provided by IPPS hospitals and by long-term
care hospitals (LTCHs) and for implementing certain statutory changes
made by the Affordable Care Act and other legislation are applicable to
discharges occurring on or after October 1, 2011 unless otherwise
specified in this final rule.

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), Wage Index, New Medical Service and Technology Add-On Payments,
Hospital Geographic Reclassifications, Graduate Medical Education,
Capital Prospective Payment, Excluded Hospitals, Medicare
Disproportionate Share Hospital (DSH), and Postacute Care Transfer
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.
Bridget Dickensheets, (410) 786-8670, Rebasing and Revising of the
Market Basket for LTCHs Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786-2261, Inpatient Quality Reporting--Program
Administration, Validation, and Reconsideration Issues.
Shaheen Halim, (410) 786-0641, Inpatient Quality Reporting--Measures
Issues Except Hospital Consumer Assessment of Healthcare Providers and
Systems Issues; and Readmission Measures for Hospitals Issues.
Elizabeth Goldstein, (410) 786-6665, Inpatient Quality Reporting--
Hospital Consumer Assessment of Healthcare Providers and Systems
Measures Issues.
Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.
Kim Spaulding Bush, (410) 786-3232, Hospital Value-Based Purchasing
Efficiency Measures Issues.

SUPPLEMENTARY INFORMATION:

Electronic Access

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

Tables Available Only Through the Internet on the CMS Web Site

In the past, a majority of the tables referred to throughout this
preamble and in the Addendum to this final rule were published in the
Federal Register as part of the annual proposed and final rules.
However, beginning in FY 2012, some of the IPPS tables and LTCH PPS
tables will no longer be published as part of the annual IPPS and LTCH
PPS proposed and final rules. Instead, these tables will be available
only through the Internet. The IPPS tables for this final rule are
available only through the Internet on the CMS Web site at: https://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp. Click on the link
on the left side of the screen titled, ``FY 2012 IPPS Final Rule Home
Page'' or ``Acute Inpatient--Files for Download.'' The LTCH PPS tables
for this FY 2012 final rule are available only through the Internet on
the CMS Web site at: https://www.cms.gov/LongTermCareHospitalPPS/LTCHPPSRN/list.asp under the list item for Regulation Number CMS-1518-
F. For complete details on the availability of the tables referenced in
this final rule, we refer readers to section VI. of the Addendum to
this final rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified above should contact
Nisha Bhat at (410) 786-4487.

Acronyms

3M 3M Health Information System
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

[[Page 51477]]

AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASC Ambulatory surgical center
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
CPI Consumer price index
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
EHR Electronic health record
EMR Electronic medical record
FAH Federation of Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
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
HICAN Health 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
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
IGI IHS Global Insight, Inc.
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
IQR Inpatient Quality Reporting
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
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NQF National Quality Forum
NTIS National Technical Information Service
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]
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

[[Page 51478]]

SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSO Short-stay outlier
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Public
Law 110-90
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) Applicable to FY 2012
C. Issuance of a Notice of Proposed Rulemaking
1. Proposed Changes to MS-DRG Classifications and Recalibrations
of Relative Weights
2. Proposed Changes to the Hospital Wage Index for Acute Care
Hospitals
3. Other Decisions and Proposed Changes to the IPPS for
Operating Costs and GME Costs
4. Proposed FY 2012 Policy Governing the IPPS for Capital-
Related Costs
5. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
6. Proposed Changes to the LTCH PPS
7. Determining Proposed Prospective Payment Operating and
Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals
8. Determining Proposed Prospective Payments Rates for LTCHs
9. Impact Analysis
10. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
11. Discussion of Medicare Payment Advisory Commission
Recommendations
D. Public Comments Received in Response to the FY 2012 IPPS/LTCH
PPS Proposed Rule
E. Finalization of Interim Final Rule With Comment Period on
Revisions to the Reductions and Increases to Hospitals' FTE Resident
Caps for Graduate Medical Education Payment Purposes
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
D. FY 2012 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 and FY 2009 Claims Data
5. 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
6. Recoupment or Repayment Adjustment for FY 2010 Authorized by
Section 7(b)(1)(B) of Public Law 110-90
7. Background on the Application of the Documentation and Coding
Adjustment to the Hospital-Specific Rates
8. Documentation and Coding Adjustment to the Hospital-Specific
Rates for FY 2011 and Subsequent Fiscal Years
9. Application of the Documentation and Coding Adjustment to the
Puerto Rico-Specific Standardized Amount
a. Background
b. Documentation and Coding Adjustment to the Puerto Rico-
Specific Standardized Amount
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
2. Summary of the RTI Study of Charge Compression and CCR
Refinement
3. Summary of Policy Changes Made in FY 2011
4. Discussion for FY 2012
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. Additions and Revisions to the HAC Policy for FY 2012
a. Contrast-Induced Acute Kidney Injury
b. New Diagnosis Codes Added to Existing HACs
c. Revision to HAC Subcategory Title
d. Conclusion
3. RTI Program Evaluation Summary
a. Background
b. FY 2009 Data Analysis
c. FY 2010 Data Analysis
d. FY 2010 RTI Analysis on POA Indicator Reporting of Current
HACs.
e. FY 2010 RTI Analysis of Frequency of Discharges and POA
Indicator Reporting for Current HACs
f. RTI Analysis of Circumstances When Application of HAC
Provisions Would Not Result in MS-DRG Reassignment for Current HACs
g. RTI Analysis of Coding Changes for HAC-Associated Secondary
Diagnoses for Current HACs
h. RTI Analysis of Estimated Net Savings for Current HACs
i. Previously Considered Candidate HACs--RTI Analysis of
Frequency of Discharges and POA Indicator Reporting
j. Current and Previously Considered Candidate HACs--RTI Report
on Evidence-Based Guidelines
k. Final Policy Regarding Current HACs and Previously Considered
Candidate HACs
G. Changes to Specific MS-DRG Classifications
1. Pre-Major Diagnostic Categories (Pre-MDCs)
a. Noninvasive Mechanical Ventilation
b. Debridement With Mechanical Ventilation Greater Than 96 Hours
With Major Operating Room (O.R.) Procedure
c. Autologous Bone Marrow Transplant
2. MDC 1 (Diseases and Disorders of the Nervous System):
Rechargeable Dual Array Deep Brain Stimulation System
3. MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth, and
Throat): Skull Based Surgeries
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Percutaneous Mitral Valve Repair With Implant
b. Aneurysm Repair Procedure Codes
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
a. Artificial Discs
b. Major Joint Replacement or Reattachment of Lower Extremities
c. Combined Anterior/Posterior Spinal Fusion
6. MDC 9 (Diseases and Disorders of the Skin, Subcutaneous
Tissue, and Breast): Excisional Debridement of Wound, Infection, or
Burn
7. MDC 10 (Endocrine, Nutritional, and Metabolic Diseases and
Disorders)
a. Nutritional and Metabolic Diseases: Update of MS-DRG Titles
b. Sleeve Gastrectomy Procedure for Morbid Obesity
8. MDC 15 (Newborns and Other Neonates with Conditions
Originating in the Perinatal Period): Discharge Status Code 66
(Discharged/Transferred to Critical Access Hospital (CAH))
9. Medicare Code Editor (MCE) Changes
10. Surgical Hierarchies
11. Complications or Comorbidity (CC) Exclusions List
a. Background
b. CC Exclusions List for FY 2012
12. 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 Into 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
13. Changes to the ICD-9-CM Coding System, Including Discussion
of the

[[Page 51479]]

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
d. ICD-10 MS-DRGs
14. Other Issues
a. O.R./Non-O.R. Status of Procedures
b. IPPS Recalled Device Policy Clarification
15. Public Comments on Issues Not Addressed in Proposed Rule
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 2012 Status of Technologies Approved for FY 2011 Add-On
Payments
a. Spiration[supreg] IBV Valve System
b. Cardio West\TM\ Temporary Artificial Heart System (Cardio
West\TM\ TAH-t)
c. Auto Laser Interstitial Thermal Therapy (AutoLITT\TM\) System
4. FY 2012 Applications for New Technology Add-On Payments
a. AxiaLIF[supreg] 2L+\TM\ System
b. PerfectCLEAN with Micrillon[supreg]
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
B. Core-Based Statistical Areas for the Hospital Wage Index
C. Occupational Mix Adjustment to the FY 2012 Wage Index
1. Development of Data for the FY 2012 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 2012
D. Worksheet S-3 Wage Data for the FY 2012 Wage Index
1. Included Categories of Costs
2. Changes to the Reporting Requirements for Pension Costs for
the Medicare Wage Index
a. Background
b. Allowable Pension Cost for the Medicare Wage Index
3. Excluded Categories of Costs
4. Use of Wage Index Data by Providers Other Than Acute Care
Hospitals under the IPPS
E. Verification of Worksheet S-3 Wage Data
F. Method for Computing the FY 2012 Unadjusted Wage Index
1. Steps for Computation
2. Imputed Floor Policy
3. FY 2012 Puerto Rico Wage Index
G. Analysis and Implementation of the Occupational Mix
Adjustment and the FY 2012 Occupational Mix Adjusted Wage Index
H. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General
2. Effects of Reclassification/Redesignation
3. FY 2012 MGCRB Reclassifications
a. FY 2012 Reclassification Requirements and Approvals
b. Applications for Reclassifications for FY 2013
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
7. Waiving Lugar Redesignation for the Out-Migration Adjustment
8. Other Geographic Reclassification Issues
a. Requested Reclassification for Single Hospital MSAs
b. Requests for Exceptions to Geographic Reclassification Rules
I. FY 2012 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
J. Process for Requests for Wage Index Data Corrections
K. Labor-Related Share for the FY 2012 Wage Index
IV. Other Decisions and Changes to the IPPS for Operating Costs and
GME Costs
A. Hospital Inpatient Quality Reporting Program
1. Background
a. Overview
b. Statutory History and History of Measures Adopted for the
Hospital IQR Program
c. Maintenance of Technical Specifications for Quality Measures
d. Public Display of Quality Measures
2. Retirement of Hospital IQR Program Measures
a. Considerations in Retiring Quality Measures from the Hospital
IQR Program
b. Retirement of Hospital IQR Program Measures for the FY 2014
Payment Determination and Subsequent Years
3. Measures for the FY 2014 and FY 2015 Hospital IQR Payment
Determinations
a. Considerations in Expanding and Updating Quality Measures
Under the Hospital IQR Program
b. Hospital IQR Program Measures for the FY 2014 Hospital IQR
Payment Determination
c. Hospital IQR Program Quality Measures for the FY 2015 Payment
Determination
4. Possible New Quality Measures and Measure Topics for Future
Years
5. Form, Manner, and Timing of Quality Data Submission
a. Background
b. Procedural Requirements for the FY 2012 Payment
Determinations and Subsequent Years
c. Procedural Requirements for FY 2013 and Subsequent Years
d. Data Submission Requirements for Chart-Abstracted Measures
e. Sampling and Case Thresholds Beginning With the FY 2015
Payment Determination
f. HCAHPS Requirements for the FY 2013, FY 2014, and FY 2015
Payment Determinations
g. Procedures for Claims-Based Measures
h. Data Submission Requirements for Structural Measures
i. Data Submission and Reporting Requirements for Healthcare-
Associated Infection (HAI) Measures Reported via NHSN
6. Chart Validation Requirements for Chart-Abstracted Measures
a. Changes to the Chart Validation Requirements and Methods for
the FY 2012 Payment Determination and Subsequent Years
b. Supplements to the Chart Validation Process for the FY 2014
Payment Determination and Subsequent Years
7. QIO Regulation Changes for Provider Medical Record Deadlines
Possibly Including Serious Reportable Events
8. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2012 Payment Determination and Subsequent Years
9. Public Display Requirements for the FY 2014 Payment
Determination and Subsequent Years
10. Reconsideration and Appeal Procedures for the FY 2012
Payment Determination
11. Hospital IQR Program Disaster Waivers
12. Electronic Health Records (EHRs)
a. Background
b. HITECH Act EHR Provisions
B. Hospital Value-Based Purchasing (VBP) Program
1. Background
2. Overview of the Hospital VBP Program Proposed Rule
3. FY 2014 Hospital VBP Program Measures
a. Background
b. Efficiency Measure--Medicare Spending per Beneficiary
Measure--for the FY 2014 Hospital VBP Program
4. Efficiency Domain (Medicare Spending per Beneficiary Measure)
Performance Period and Baseline Period
5. Simultaneous Specification of Additional Measures for the
Hospital VBP Program and the Hospital IQR Program
6. Responses to Additional Hospital VBP Program Comments
C. Hospital Readmissions Reduction Program
1. Background
a. Overview
b. Statutory Basis for the Hospital Readmissions Reduction
Program
2. Implementation of the Hospital Readmissions Reduction Program
a. Overview
b. Provisions in the FY 2012 IPPS/LTCH PPS Rulemaking
c. Provisions to be Included in the FY 2013 IPPS/LTCH PPS
Proposed Rule
d. Expansion of the Applicable Conditions To Be Included in the
Future Rulemaking
3. Provisions of the Hospital Readmissions Reduction Program
a. Applicable Conditions for FY 2013 Hospital Readmissions
Reduction Program
b. Definition of ``Readmissions''
c. Readmission Measures and Related Methodology
D. Rural Referral Centers (RRCs) (Sec. 412.96)
1. Case-Mix Index (CMI)
2. Discharges
E. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)

[[Page 51480]]

1. Background
2. Temporary Changes for FYs 2011 and 2012
3. Discharge Data Source Used to Identify Qualifying Low-Volume
Hospitals and Calculate the Payment Adjustment (Percentage Increase)
for FY 2012
F. Indirect Medical Education (IME) Adjustment
1. Background
2. IME Adjustment Factor for FY 2012
G. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs) and Indirect Medical Education (IME) (Sec. Sec.
412.105 and 412.106)
1. Background
2. Policy Change Relating to the Exclusion of Hospice Beds and
Patient Days From the Calculation of the Medicare DSH Payment
Adjustment and the IME Payment Adjustment
a. Background
b. Hospice Inpatient Services
H. Medicare-Dependent, Small Rural Hospitals (MDHs) (Sec.
412.108)
1. Background
2. Extension of the MDH Program
I. Certified Register Nurse Anesthetists (CRNA) Services
Furnished in Rural Hospitals and CAHs (Sec. 412.113)
J. Additional Payments for Qualifying Hospitals With Lowest per
Enrollee Medicare Spending
1. Background
2. Method for Identifying Qualifying Hospitals and Eligible
Counties
3. Determination of Annual Payment Amounts
4. Eligible Counties and Qualifying Hospitals
5. Payment Determination and Distributions for FY 2011 and FY
2012
K. Changes in the Inpatient Hospital Update
1. FY 2012 Inpatient Hospital Update
2. FY 2012 Puerto Rico Hospital Update
3. Productivity Adjustment
L. Additional Payments to Hospitals With High Percentage of End-
Stage Renal Disease (ESRD) Discharges (Sec. 412.104)
M. Changes to the Reporting Requirements for Pension Costs for
Medicare Cost-Finding Purposes
1. Background
2. Allowable Defined Benefit Pension Plan Cost for Medicare
Cost-Finding Purposes
N. Rural Community Hospital Demonstration Program
1. Background
2. Changes to the Demonstration Program Made by the Affordable
Care Act
3. FY 2012 Budget Neutrality Adjustment
a. Component of the FY 2012 Budget Neutrality Adjustment that
Accounts for Estimated Demonstration Program Costs of the ``Pre-
Expansion'' Participating Hospitals
b. Portion of the FY 2012 Budget Neutrality Adjustment That
Accounts for Estimated FY 2012 Demonstration Program Costs for
Hospitals Newly Selected to Participate in the Demonstration Program
c. Portion of the FY 2012 Budget Neutrality Adjustment to Offset
the Amount by Which the Costs of the Demonstration Program in FYs
2007 and 2008 Exceeded the Amount That Was Identified in the FYs
2007 and 2008 IPPS Final Rules as the Budget Neutrality Offset for
FYs 2007 and 2008
O. Bundling of Payments for Services Provided to Outpatients Who
Later Are Admitted as Inpatients: 3-Day Payment Window
1. Background
2. Establishment of Condition Code 51 (Attestation of Unrelated
Outpatient Nondiagnostic Services)
3. Applicability of the Payment Window Policy to Services
Furnished at Physicians' Practices
P. Changes to MS-DRGs Subject to the Postacute Care Transfer
Policy
1. Background
2. Changes to the Postacute Care Transfer MS-DRGs
Q. Hospital Services Furnished Under Arrangements
R. Finalization of Interim Final Rule With Comment Period on
Revisions to the Reductions and Increases to Hospitals' FTE Resident
Caps for Graduate Medical Education Purposes
1. Background and Provisions of the Interim Final Rule With
Comment Period
a. Statutory Authority
b. Reductions and Increases to Hospitals' FTE Resident Caps for
GME Payment Purposes Under Section 5503 of the Affordable Care Act
c. Treatment of Affiliated Groups Under Section 5503 of the
Affordable Care Act
d. Section 203 of the Medicare and Medicaid Extenders Act of
2010 (Pub. L. 111-309)
2. Summary of the Provisions of the Interim Final Rule With
Comment Period
3. Summary of Public Comments, Departmental Responses, and
Statements of Final Policies
a. Summary of Public Comments and Departmental Responses
b. Final Policies
4. Collection of Information Requirements
5. Regulatory Impact Statement
a. Statement of Need
b. Overall Impact
c. Anticipated Effects
d. Alternatives Considered
e. Conclusion
6. Comment on Issues Outside of the Scope of the Interim Final
Rule With Comment Period
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 2012: MS-DRG Documentation and Coding
Adjustment
1. Background
2. Prospsective MS-DRG Documentation and Coding Adjustment to
the National Capital Federal Rate for FY 2012 and Subsequent Years
3. Documentation and Coding Adjustment to the Puerto Rico-
Specific Capital Rate
F. Other Proposed Changes for FY 2012
VI. Changes for Hospitals Excluded From the IPPS
A. Excluded Hospitals
B. Critical Access Hospital (CAH) Payment for Ambulance Services
1. Background
2. Requirement for CAH Ambulance Within a 35-Mile Location of a
CAH or Entity
C. Report of Adjustment (Exceptions) Payments
VII. Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for FY 2012
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 2012
3. Development of the FY 2012 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 2012
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 Proposed FY 2012 MS-LTC-DRG
Relative Weights
C. Quality Reporting Program for LTCHs
1. Background and Statutory Authority
2. Quality Measures for the LTCH Quality Reporting Program for
FY 2014
a. Considerations in the Selection of the Quality Measures
b. LTCH Quality Measures for FY 2014 Payment Determination
3. Possible LTCH Quality Measures Under Consideration for Future
Years
4. Data Submission Methods and Timelines
a. Method of Data Submission for HAIs
b. Timeline for Data Reporting Related to HAIs
c. Method of Data Collection and Submission for the Pressure
Ulcer Measure Data
d. Timeline for Data Reporting Related to Pressure Ulcers
5. Public Reporting and Availability of Data Submitted
D. Rebasing and Revising of the Market Basket Used Under the
LTCH PPS
1. Background
2. Overview of the FY 2008-Based RPL Market Basket
3. Rebasing and Revising of the RPL Market Basket
a. Development of Cost Categories

[[Page 51481]]

b. Final Cost Category Computation
c. Selection of Price Proxies
d. Methodology for Capital Portion of the RPL Market Basket
e. FY 2012 Market Basket Update for LTCHs
f. Labor-Related Share
E. Changes to the LTCH Payment Rates and Other Changes to the FY
2012 LTCH PPS
1. Overview of Development of the LTCH Payment Rates
2. FY 2012 LTCH PPS Annual Market Basket Update
a. Overview
b. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
c. Market Basket Under the LTCH PPS for FY 2012
d. Productivity Adjustment
e. Annual Market Basket Update for LTCHs for FY 2012
3. Budget Neutrality Adjustment for the Changes to the Area Wage
Level Adjustment
4. Greater Than 25 Day Average Length of Stay Requirement for
LTCHs
a. Determining the Average Length of Stay When There is a Change
of Ownership
b. Inclusion of Medicare Advantage (MA) Days in the Average
Length of Stay Calculation
F. Application of LTCH Moratorium on the Increase in Beds at
Section 114(d)(1)(B) of Public Law 110-173 (MMSEA) to LTCHs and LTCH
Satellite Facilities Established or Classified as Such Under Section
114(d)(2) of Public Law 110-173
VIII. MedPAC Recommendations
IX. Other Required Information
A. Requests for Data From the Public
B. Collection of Information Requirements
1. Statutory Requirement for Solicitation of Comments
2. ICRs for Add-On Payments for New Services and Technologies
3. ICRs for the Hospital Inpatient Quality Reporting (IQR)
Program
4. ICRs for the Occupational Mix Adjustment to the FY 2012 Index
(Hospital Wage Index Occupational Mix Survey)
5. Hospital Applications for Geographic Reclassifications by the
MGCRB
6. ICRs for the Quality Reporting Program for LTCHs
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, 2011
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2012
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 2012
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2012
C. Capital Input Price Index
IV. Changes to Payment Rates for Certain Excluded Hospitals: Rate-
of-Increase Percentages for FY 2012
V. Changes to the Payment Rates for the LTCH PPS for FY 2012
A. LTCH PPS Standard Federal Rate for FY 2012
B. Adjustment for Area Wage Levels Under the LTCH PPS for FY
2012
C. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
D. Computing the Adjusted LTCH PPS Federal Prospective Payments
for FY 2012
VI. Tables Referenced in This Final Rulemaking and Available Through
the Internet on the CMS Web Site
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
A. Introduction
B. Need
C. Objectives of the IPPS
D. Limitations of Our Analysis for the IPPS
E. Hospitals Included in and Excluded From the IPPS
F. Effects on Hospitals and Hospital Units Excluded From the
IPPS
G. Quantitative Effects of the Policy Changes Under the IPPS for
Operating Costs
1. Basis and Methodology of Estimates
2. Analysis of Table I
3. Impact Analysis of Table II
H. Effects of Other Policy Changes
1. Effects of Policy on HACs, Including Infections
2. Effects of Policy Changes Relating to New Medical Service and
Technology Add-On Payments
3. Effects of Requirements for Hospital Inpatient Quality
Reporting (IQR) Program
4. Effects of Additional Hospital Value-Based Purchasing (VBP)
Program Requirements
5. Effects of Requirements for Hospital Readmissions Reduction
Program
6. Effects of Policy Changes Relating to Payment Adjustments for
Medicare Disproportionate Share Hospitals (DSHs) and Indirect
Medical Education (IME)
7. Effects of the FY 2012 Low-Volume Hospital Payment Adjustment
8. Effects of Changes Relating to MDHs
9. Effects of Policy Relating to CRNA Services Furnished in
Rural Hospitals and CAHs
10. Effects of Changes Relating to ESRD Add-On Payment
11. Effects of Changes Relating to the Reporting Requirements
for Pension Costs for Medicare Cost-Finding and Wage Reporting
Purposes
12. Effects of Implementation of Rural Community Hospital
Demonstration Program
13. Effects of Changes to List of MS-DRGs Subject to the
Postacute Care Transfer and DRG Special Pay Policy
14. Effects of Changes Relating to Hospital Services Furnished
Under Arrangements
15. Effects of Change Relating to CAH Payment for Ambulance
Services
16. Effects of Finalization of Revisions to the Reductions and
Increases to Hospitals' FTE Resident Caps for Graduate Medical
Education Payment Purposes
I. Effects of Changes in the Capital IPPS
1. General Considerations
2. Results
J. Effects of Payment Rate Changes and Policy Changes Under the
LTCH PPS
1. Introduction and General Considerations
2. Impact on Rural Hospitals
3. Anticipated Effects of LTCH PPS Payment Rate Change and
Policy Changes
4. Effect on the Medicare Program
5. Effect on Medicare Beneficiaries
K. Alternatives Considered
L. Overall Conclusion
1. Acute Care Hospitals
2. LTCHs
M. Accounting Statements and Tables
1. Acute Care Hospitals
2. LTCHs
II. Regulatory Flexibility Act (RFA) Analysis
III. Unfunded Mandate Reform Act (UMRA) Analysis
IV. 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 2012
A. Final FY 2012 Inpatient Hospital Update
B. Final Update for SCHs and MDHs for FY 2012
C. Final FY 2012 Puerto Rico Hospital Update
D. Final Update for Hospitals Excluded From the IPPS
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare

I. Background

A. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to pay for the capital-related costs of hospital inpatient
stays under a prospective payment system (PPS). Under these PPSs,
Medicare payment for hospital inpatient operating and capital-related
costs is made at predetermined, specific rates for each hospital
discharge. Discharges are classified according to a list of diagnosis-
related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided

[[Page 51482]]

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 certain 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 varies 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, which
is determined from 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, Public Law 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.
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

[[Page 51483]]

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) Applicable to FY 2012

The Patient Protection and Affordable Care Act (Pub. L. 111-148),
enacted on March 23, 2010, and the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30,
2010, made a number of changes that affect 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 affect the updates to the IPPS and the LTCH PPS and
providers and suppliers. The provisions of the Affordable Care Act that
were applicable to the IPPS and the LTCH PPS for FYs 2010 and 2011 were
implemented in the following documents:
On June 2, 2010, we issued in the Federal Register 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, which were
required by or directly resulted from implementation of provisions of
the Affordable Care Act.
On August 16, 2010, we issued in the Federal Register a final rule
(75 FR 50042) that implemented provisions of the Affordable Care Act
applicable to the IPPS and LTCH/PPS for FY 2011.
In this final rule, we are implementing the following provisions
(or portions of the following provisions) of the Affordable Care Act
that are applicable to the IPPS and LTCH PPS for FY 2012:
Section 3001 of Public Law 111-148, which provides for
establishment of a hospital value-based purchasing program and
applicable measures for value-based incentive payments with respect to
discharges occurring during FY 2013.
Section 3004 of Public Law 111-148, which provides for the
submission of quality data for LTCHs beginning in FY 2013 in order to
receive the full annual update to the payment rates beginning with FY
2014 and the establishment of quality data measures by FY 2012 for the
FY 2014 payment determination.
Section 3025 of Public Law 111-148, which provides for a
hospital readmissions reduction program and related quality data
reporting measures.
Section 3124 of Public Law 111-148, which provides for
extension of the Medicare-dependent, small rural hospital (MDH) program
through FY 2012.
Section 3401 of Public Law 111-148, which provides for the
incorporation of productivity improvements into the market basket
updates for IPPS hospitals and LTCHs.
In addition, we are continuing in FY 2012 to implement the
following provisions, which were initiated in FY 2011:
Section 10324 of Public Law 111-148, which provided for a
wage adjustment for hospitals located in frontier States.
Sections 3401 and 10319 of Public Law 111-148 and section
1105 of Public Law 111-152, which revise certain market basket update
percentages for IPPS and LTCH PPS payment rates for FY 2012.
Sections 3125 and 10314 of Public Law 111-148, which
provide for temporary percentage increases in payment adjustments to
low-volume hospitals for discharges occurring in FY 2012.
Section 1109 of Public Law 111-152, which provides for
additional payments in FY 2012 for qualifying hospitals in the lowest
quartile of per capita Medicare spending.
Section 5503 of Public Law 111-148, as amended by Public
Law 111-152 and section 203 of Public Law 111-309, which provides for
the reduction in FTE resident caps for direct GME under Medicare for
certain hospitals, and to authorize the ``redistribution'' of the
estimated number of FTE resident slots to other qualified hospitals. In
addition, section 5503 requires the application of these provisions to
IME in the same manner as the FTE resident caps for direct GME.

C. Issuance of a Notice of Proposed Rulemaking

The May 5, 2011 Federal Register (76 FR 25788) included the
proposed rule that set forth proposed changes to the Medicare IPPS for
operating costs and for capital-related costs of acute care hospitals
in FY 2012. We also set forth proposed changes relating to payments for
IME costs and payments to certain hospitals that continue to be
excluded from the IPPS and paid on a reasonable cost basis. In
addition, we set forth proposed changes to the payment rates, factors,
and other payment rate policies under the LTCH PPS for FY 2012.
Below is a summary of the major changes that we proposed to make:
1. 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 2012 resulting from implementation of the MS-DRG
system.
A discussion of the Research Triangle Institute,
International (RTI) reports and recommendations relating to charge
compression.
Proposed recalibrations of the MS-DRG relative weights.
Proposed changes to hospital-acquired conditions (HACs)
and a listing and discussion of HACs, including infections, that would
be subject to the statutorily required quality adjustment in MS-DRG
payments for FY 2012.
We discussed the FY 2012 status of new technologies approved for
add-on payments for FY 2011 and presented our evaluation and analysis
of the FY 2012 applicants for add-on payments for high-cost new medical
services and technologies (including public input, as directed by
Public Law 108-173, obtained in a town hall meeting).

[[Page 51484]]

2. 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:
The proposed FY 2012 wage index update using wage data
from cost reporting periods beginning in FY 2008.
Analysis and implementation of the proposed FY 2012
occupational mix adjustment to the wage index for acute care hospitals,
including discussion of the 2010 occupational mix survey.
A proposal to change the reporting requirements for
pension costs for the Medicare wage index.
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 2012 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 2012 hospital wage index.
Determination of the labor-related share for the proposed
FY 2012 wage index.
3. 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 476, including the following:
The reporting of hospital quality data under the Hospital
Inpatient Quality Reporting (IQR) Program as a condition for receiving
the full annual payment update increase.
The proposed implementation of the Hospital Value-Based
Purchasing Program measures.
The proposed establishment of hospital readmission
measures for reporting of hospital quality data.
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
2012.
Proposed payment adjustment for low-volume hospitals.
Proposal for counting hospice days in the formula for
determining the payment adjustment for disproportionate share
hospitals.
Proposal for making additional payments for qualifying
hospitals with lowest per enrollee Medicare spending for FY 2012.
Proposal to clarify ESRD add-on payment requirements based
on cost report requirements.
Proposal relating to changes to the reporting requirements
for pension costs for Medicare cost-finding purposes.
Proposal to implement statutory change to the hospital
payment update, including incorporation of a productivity adjustment.
Discussion of the Rural Community Hospital Demonstration
Program and a proposal for making a budget neutrality adjustment for
the demonstration program.
Discussion of August 2010 interim final rule with comment
period and further proposed changes relating to the 3-day payment
window for payments for services provided to outpatients who are later
admitted as inpatients.
4. Proposed FY 2012 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 2012 and the proposed MS-DRG
documentation and coding adjustment for FY 2012.
5. 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 certain excluded hospitals. In
addition, we discussed proposed changes relating to payment for TEFRA
services furnished under arrangements and payment for ambulance
services furnished by CAH-owned and operated entities.
6. 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 2012, including the annual update of
the MS-LTC-DRG classifications and relative weights for use under the
LTCH PPS for FY 2012 and the proposed rebasing and revising of the
market basket for LTCHs. In addition, we set forth proposals for
implementing the quality data reporting program for LTCHs. We also
proposed to clarify two policies regarding the calculation of the
average length of stay requirement for LTCHs, and proposed a policy to
address a LTCH moratorium issue.
7. 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 2012
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 rate-of-increase limits for cost
reporting periods beginning in FY 2012 for certain hospitals excluded
from the IPPS.
8. 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 2012
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 high-cost outliers, including the fixed-
loss amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH
PPS.
9. 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.
10. 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 2012 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 fo

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